Pandemic Forcing Many to Retire Earlier Than Anticipated

Allianz Life’s 2021 “Retirement Risk Readiness Study” finds that the COVID-19 pandemic is having a detrimental impact on people’s retirement, with 68% of those who have retired in 2021 saying they retired earlier than they had wanted to, up from 50% in 2020. Exactly one third, 33%, said health care issues were the reason for their early retirement, up from 25% in 2020. However, only 22% said it was due to unexpected job loss, down from 34% in 2020.

There appears to be a disconnect between people’s retirement plans and what actually occurs, as 70% of non-retirees say they expect to work at least part-time in retirement, up from 65% in 2020. In reality, a scant 6% of retirees are working, virtually on par with the 7% of retirees who were working last year.

Sixty-nine percent of Americans say they believe the COVID-19 pandemic will have a greater overall impact on them than the Great Recession. This jumps to 86% among retirees.

Forty-three percent say they are unable to save anything for retirement right now, up from 37% in 2020. Forty-two percent say they are too far behind on their retirement goals to catch up, up from 31% in 2020. Forty-nine percent say they are just trying to get by day-to-day and cannot even think of saving for retirement, and 56% say stock market swings are making them nervous about their retirement savings.

Americans are responding with much more fear about their finances following the outbreak of the pandemic than they did during the Great Recession, with 61% now saying they are nervous about their day-to-day finances, compared with 39% following the Great Recession. They are also more nervous about their retirement savings (66% versus 34%), their professional career (58% versus 42%), saving and spending money (61% versus 39%) and managing market risk when saving for retirement (60% versus 40%).

“Although the full story of this pandemic won’t be known for some time, it’s clear that the financial security of many Americans has been severely compromised,” says Kelly LaVigne, vice president of consumer insights at Allianz Life. “It is notable that so many people are concerned about both the short-term and long-term financial effects of this crisis. It’s crucial that Americans use this opportunity to consider any new risks that could affect their retirement planning and develop strategies to help mitigate those risks and future unexpected events.”

Allianz says the survey does show some signs of hope that Americans might be willing to be proactive about repairing their savings, as 65% say they are now paying more attention to what they are saving and spending, and 58% have cut back on their spending.

Near-retirees, those within 10 years of retiring, are taking action, in particular by making sure they are saving enough in their retirement accounts (29% versus 23% in 2020), diversifying their portfolios (42% versus 27%), researching expenses and risks associated with retirement (43% versus 35%), creating a formal retirement plan with a financial professional (37% versus 29%) and purchasing a product that provides a guaranteed source of retirement income (38% versus 30%).

Likewise, recordkeeper LT Trust found that between 2019 and 2020, the average account balance increased by 30.8%, and in that time, the average 401(k) contribution increased by 6.12%.

“Black swan events like this global pandemic are often the trigger that convinces people to take a more proactive approach to managing risks that may come in retirement,” LaVigne adds. “In that respect, it is encouraging to see that many Americans are taking this as a wake-up all and adding more risk management measures, including sources of guaranteed and supplemental retirement income, into their retirement planning process.”

Allianz’s findings are based on an online survey conducted in December among 1,000 people with an annual household income of $50,000 or greater if single, or $75,000 or more if married or living with a partner, or investable assets of $150,000 or more.