The coronavirus crisis and its far-reaching economic impact are creating new worries for consumers when it comes to their retirement plans.
With many consumers out of work and others facing economic hardship due to the pandemic, coming up with current living expenses and putting money away for retirement can be a challenge. SimplyWise, a site providing retirement guidance, surveyed consumers to see how they’re feeling about their finances today and their ability to prepare for tomorrow.
For a majority of consumers, their confidence in their ability to retire comfortably is going in the wrong direction.
Concerns steadily rising
Throughout the pandemic, the economy has been a concern at many income levels.
More than half of respondents surveyed in July — 62% — said they are more concerned about their retirement today than they were a year ago. That percentage has even risen since May, when 56% of consumers said they were more concerned about retirement this year than last year.
On top of that, half of respondents said they fear they will outlive their retirement savings.
Their concerns may be well-founded, as the survey suggests many consumers have gotten off to a slow start when it comes to amassing resources for retirement. In fact, 80% of overall respondents said they could not live off of their savings for longer than one year; this included 80% of respondents in their 50s. Among those over 60, only 56% have enough savings to last more than a year.
Among different racial groups, financial insecurity is an even greater problem: 48% of Black Americans and 43% of Hispanic Americans said they could only survive less than a month on savings, compared to 33% of white Americans.
Nearly three-fourths of respondents (72%) said they plan to continue working during their retirement — up from 67% in May.
The devastating toll of the pandemic
For many consumers, financial setbacks in the past few months have strained their pocketbooks even further. For example, around 20% of respondents in their 60s have been laid off or furloughed because of the pandemic.
Many consumers are also working with less money since the pandemic started:
- 67% of white Americans are currently earning what they were earning before the pandemic
- 50% of Hispanic Americans are earning what they were earning prior to COVID-19
- 45% of Black Americans are making what they were making before the pandemic began
As a result of these financial challenges, consumers are putting off saving for retirement and tapping into their savings.
Though experts warn against raiding your retirement account, nearly a quarter of those who have a 401(k) plan — 24% — said they are planning to withdraw funds from it. The percentage rises for those who have been laid off because of COVID-19, as 41% of those with a 401(k) plan who have lost their jobs during the pandemic are planning to tap their retirement accounts.
Other savings accounts are also being raided, as 10% of respondents said they are planning to take money from their emergency savings accounts — in particular, 20% of those who lost their jobs because of the pandemic are planning to do so.
In addition, one-third of respondents said they have saved $0 for retirement in the past year. Of respondents who have lost their jobs because of the pandemic, more than half — 55% — have saved less than $500 for retirement in the past 12 months.
Methodology: SimplyWise surveyed 1,128 adults between July 3 and July 6, 2020.