Data & Research February 26, 2021

Pandemic Forcing Many to Retire Earlier Than Anticipated

Nearly 70% of retirees say they retired earlier than they had expected, up from 50% in 2020.

Reported by

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.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

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.

Compliance February 26, 2021

Principal Life Insurance Co. Named In Self-Dealing ERISA Suit

Related self-dealing claims made against other national financial services providers by participants in their own retirement plans have met varying degrees of success.

Reported by


A new Employee Retirement Income Security Act (ERISA) lawsuit filed in the U.S. District Court for the Southern District of Iowa accuses the Principal Life Insurance Co. of committing various fiduciary breaches in the operation of two retirement plans open to its own employees.

Also named as a defendant in the case are the retirement plans’ investment and administrative committees. The allegations against the defendants fit into the mold of similar self-dealing suits that have been filed against national financial services providers in recent years.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“Principal affiliates act as the primary investment adviser for the pooled separate accounts in which the plans invest,” the lawsuit states. “Principal affiliates charge a high investment adviser fee for that service. But Principal’s affiliates hire sub-advisers to do the essential work of portfolio management. Principal does, however, keep much of the investment management fees. The plans could go straight to the sub-adviser for the same service, cutting out Principal as a middleman, and pay less than what they pay now for the same service, with millions of dollars of annual savings.”

The lawsuit suggests the defendants “chose and maintained Principal investment products and plan administration services because Principal, its subsidiaries and its officers benefited financially from the fees.

“Defendants also breached their fiduciary duties by causing the plans to maintain a vendor relationship with Principal for administrative services whereby the plans paid, directly or indirectly, higher than reasonable fees to Principal for such services,” the complaint continues.

Later on, the complaint notes that, with the notional exception of a brokerage window plaintiffs say was built into the plans as a condition of an ERISA class action settlement the plans entered into in 2015, the plans invested exclusively in Principal investment options during the class period.

Responding to a request for comment, Principal shared the following statement: “We disagree with the allegations in this lawsuit and will vigorously contest them. Principal has always been committed to offering meaningful benefit programs to employees and is one of many companies in the industry that have had lawsuits filed against them making these kinds of claims.”

A significant portion of the text of the lawsuit is dedicated to analyzing the way the investment committee hired and monitored various sub-advisers. The complaint suggests that “every one of the sub-advisers for the Principal investment options (or underlying Principal mutual fund as the case may be) offers portfolio management services directly to institutional investors as a separately managed account (not to be confused with a pooled separate account, which is a commingled fund offered by an insurance company multiple investors)—in other words, a single client account.

“This means that the plans’ fiduciaries could have negotiated directly with the sub-adviser to a given Principal fund held by the plans for investment management matters rather than paying a Principal affiliate, Principal Global Investors,” the complaint suggests. “But the investment committee did not do so.”

The upshot of this line of argument is ultimately that the sub-advisers “would readily have agreed” to include the plans in their aggregated assets to acquire and keep Principal’s sizable plan business.

“Thus,” the complaint suggests, “the plans could have obtained the best fee terms available to Principal had defendants used the plans’ assets and bargaining power to the plans’ advantage. Defendants chose not to do so.”

In similar cases, defendants have often argued that such allegations as those recounted above do not sufficiently state a claim that fiduciary breaches occurred. Their central point is that the simple fact that a plan is paying higher fees than its peers or a given benchmark does not in itself imply that any disloyalty or imprudence occurred.

Such defendants also often point to meeting minutes, governing plan documents and other records in an attempt to demonstrate that an internal review processes was in place and was followed diligently by the fiduciaries. Indeed, the complaint in this latest case acknowledges directly that Principal maintains a due diligence team that evaluates sub-advisers for its pooled funds quarterly, based on investment guidelines when each sub-adviser is hired. The monitoring process involves quantitative and qualitative assessments, the complaint acknowledges.

The full text of the complaint is available here. 

«