How COVID Has Affected Retirement Expectations

While most workers believe they are still on track for a secure retirement, the findings from a new survey suggest that many are not saving enough in light of the financial setbacks suffered during the pandemic.   

According to the Transamerica Center for Retirement Studies’ (TCRS) 111-page survey report, "Emerging from the COVID-19 Pandemic: The Retirement Outlook of the Workforce," 79% of employed workers are saving through an employer-sponsored retirement plan and/or outside the workplace. Among those who are participating in a 401(k) or similar plan offered by their employer, the median contribution rate is 12% of their annual salary, while 38% are contributing more than 15%. 

However, 39% of employed workers have dipped into their retirement accounts, including 29% who have taken a loan and 27% who have taken an early and/or hardship withdrawal. In addition, just 30% “strongly agree” they are building a large enough nest egg for retirement. What’s more, despite having access to many resources offered through their employer’s retirement plan providers, only 32% have a financial strategy for retirement in the form of a written plan, TCRS notes. 

And while total savings in household retirement accounts is $65,000 (estimated median), workers estimate they will need $350,000 (median) by the time they retire to feel financially secure. Not surprisingly, TCRS found that needs vary by employment status with self-employed workers estimating they will need $500,000, compared with employed workers ($400,000) and unemployed workers ($100,000) (both medians).  

“Employed workers are generally well-positioned to save, invest and prepare for retirement,” observes Catherine Collinson, CEO and President of Transamerica Institute and TCRS. “However, not all employed workers are offered workplace retirement plans. Furthermore, among all employed workers, many are inadequately saving,” she says. 

Retirement Expectations 

Still, most workers indicate that the pandemic did not change their retirement expectations. TCRS reports that about 6 in 10 workers (58%) say that the pandemic has not changed when they expect to retire, while 34% say that it has changed their expectations, including 23% who expect to retire later and 11% who expect to retire earlier. 

Financially, employed and self-employed workers have weathered the pandemic better than those who are unemployed but looking for work. TCRS notes that all three groups experienced negative employment impacts and made sometimes difficult adjustments to their financial situation. Here, the survey found that 38% experienced one or more negative employment impacts such as reduced hours (20%), reduced salary (13%), being laid off (12%) and being furloughed (12%). In addition, 28% were unemployed at some point.

And while the most often cited financial priority among workers is saving for retirement (52%), perceived insufficient income and interference of debt is affecting the ability to save for retirement. 

TCRS reports that 53% of workers agree with the statement, “I don’t have enough income to save for retirement,” including 24% who “strongly agree” and 29% who “somewhat agree.” Similarly, 53% of workers agree with the statement, “Debt is interfering with my ability to save for retirement,” including 22% who “strongly agree” and 31% who “somewhat agree.” 

“Without doubt, the COVID-19 pandemic has disrupted the workforce and the employment of many workers. Employment setbacks often trigger financial setbacks that can easily threaten people's ability to achieve a secure retirement,” notes Collinson.  

Calls to Action

When asked about priorities for the president and Congress to help people have a financially secure retirement, the workforce respondents called for: 

• addressing Social Security's funding shortfalls (51%);
• making out-of-pocket health care expenses and prescription drugs more affordable (42%);
• addressing Medicare's funding shortfalls (41%);
• increasing access to affordable housing (33%);
• supporting family caregivers (32%);
• expanding access to workplace retirement plans to all workers (31%);
• innovating solutions for long-term care services and supports (30%);
• implementing financial literacy in schools (30%); and 
• expanding the Saver’s Credit (30%).

“As we emerge from the pandemic, we face an urgent need to strengthen our retirement system so that everyone can retire with dignity. A collaborative, concerted effort among policymakers, employers, and workers is required,” adds Collinson.

The findings are based on a survey conducted within the U.S. by The Harris Poll on behalf of Transamerica Institute and TCRS between Oct. 28 and Dec. 10, 2021, among a nationally representative sample of more than 10,000 adults.