Despite the stock market reaching record highs, an alarming number of retirees say their retirement account balances had not yet recovered to pre-pandemic levels by the end of 2020.
Nearly half—48% of retirees with retirement accounts—said their accounts have not recovered to pre-pandemic levels, according to a new survey by The Senior Citizens League (TSCL), which admitted to being somewhat perplexed by the survey findings.
“While the U.S. stock market ended 2020 at an all-time high, the retirement savings held by many retired adults do not appear to have benefited from the run up,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League. “There’s no doubt about it, the Coronavirus-caused recession is forcing many older adults to rethink retirement plans.”
The survey, which was conducted from mid-January to mid-February of this year, asked the following question: “How has the coronavirus-caused recession affected the value of your retirement savings as of December 31, 2020?”
While 18% of survey participants reported that they had no retirement savings at all, 48% of those with retirement savings reported that the value of those accounts was still down on December 31, 2020, from the ending value on December 31, 2019. About half of those (23%) said their retirement savings were down between 10-25% while 14% said they were still down by more than 25%.
Thirty-one percent reported that their savings had recovered to about the same value as at the end of 2019.
Only 21% reported that their savings had increased by December 31, 2020. Of this group, only 9% said their savings had increased by more than 10% (The S&P 500 stock index finished the year up by more than 16%).
“Depending on how long it takes one’s retirement savings to recover, the 2020 coronavirus recession could have a deep and life-changing impact on the retirement security of older Americans,” said Johnson, who added that own retirement savings were negatively impacted by the Great Recession of 2007-09.
“Those who have lost significant sums might plan to work longer and retire later if they can,” Johnson said. “Those who were working and have lost a job and their employer-provided healthcare coverage may wind up working for lower earnings, and could potentially experience worse health.”
All of this adds up to less money for retirement, and greater dependence on Social Security as insurance against retirement savings that are so closely tied to the value of equities and housing.
“This situation was caused by COVID-19 and illustrates why Congress needs to strengthen Social Security and Medicare benefits,” Johnson said.
“This is exactly why the guaranteed income nature of Social Security is so important,” Johnson said, noting that TSCL supports legislation that would boost Social Security benefits for all retirees and supports legislation that would lower Medicare costs.
TSCL plans to do a follow-up to this survey question to get more details. Johnson noted that if retirees are invested in an overly conservative way—such as bonds, CDs and money market funds—they may have missed the run up entirely.
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