As the impact of COVID-19 on retirement continues to emerge, new survey results show that many workers and retirees are optimistic about their financial future, while others say the pandemic has permanently impacted their ability to save.
Particularly for workers whose employment has been negatively impacted by COVID-19, retirement has become an even more challenging goal over the last eight months. Many have expressed pessimism about their life in retirement—or they worry whether they can retire at all, according Wells Fargo’s 2020 retirement study.
In fact, 58% of workers impacted by the pandemic now say they don’t know if they have enough saved to retire because of COVID-19, compared to 37% of all workers. Moreover, among workers impacted by COVID-19:
- 70% say they are worried about how to make sure they don’t run out of money in retirement;
- 61% say they are much more afraid of life in retirement; and
- 61% say the pandemic took the joy out of looking forward to retirement.
Women and Younger Generations
The impacts of COVID-19 are varied but meaningful across generations and genders. The survey found that women are less sure if they will be able to save enough for retirement and appear to be in a more precarious financial situation than men.
When looking at retirement savings levels, a striking contrast emerges. Working men report median retirement savings of $120,000, compared to $60,000 for working women, which in and of itself is alarming. But for those impacted by COVID-19, the results are even more drastic, with men reporting median retirement savings of $60,000, compared to only $21,000 for women.
What’s more, only slightly more than half of working women (51%) say they are saving enough for retirement or that they are confident they will have enough savings to live comfortably in retirement (51%). In addition, women impacted by COVID-19 are less likely to have access to an employer-sponsored retirement savings plan (59%) and are less likely to participate (77%).
Similarly, 49% of women workers say they are unable to estimate how much money they will need in retirement, compared to 33% of men. Broken down by generation, a sizeable percentage of workers say they don’t know if they can save enough to retire because of the impact of COVID-19: 39% of Millennials, 38% of Gen X and 31% of Boomers.
Entitlement Programs
An additional effect underscored by the pandemic is that nearly all workers and retirees say that Social Security and Medicare play or will play a significant role in their retirement. According to the study, 71% of workers, 81% of those negatively impacted by COVID-19 and 85% of retirees say that COVID-19 reinforced how important Social Security and Medicare will be or is for their retirement.
Overall, workers expect that Social Security will make up approximately one-third of their monthly budget (30% median) in retirement. Even among wealthy workers, Social Security and Medicare factor significantly into their plans, with high-net-worth workers expecting Social Security to cover 20% (median) of their monthly expenses.
Well Fargo notes that this dependence by many on the programs also drives anxiety. The vast majority of the study’s respondents share concerns that the programs will not be available when they need them and worry that the government won’t protect them.
To that end, vast majorities also want politicians to help with retirement:
- 76% of workers and 81% of retirees say retirement should be a top priority for the presidential candidates; and
- 88% of workers and 91% of retirees say Congress needs to make it easier for workers to access tax-friendly retirement plans.
Still Optimistic
At the same time, the study shows that despite a challenging environment, many American workers and retirees remain optimistic about their financial future. Most workers say they are in control of their financial life (79%), can pay monthly expenses (95%) and feel confident they are able to manage their finances (86%). In addition, 83% of workers say they could pay for a financial emergency of $1,000 without having to borrow money from friends or family.
Yet, survey respondents acknowledge they could improve their financial planning. Slightly more than half—54% of workers and 50% of retirees—say they have a detailed financial plan and just 27% of workers and 29% of retirees have a financial advisor.
“The study found incredible optimism and resiliency among American workers and retirees, which is remarkable in the current environment,” says Kim Ta, head of Client Service and Advice for Wells Fargo Advisors. “As an industry, we must help more investors make a plan for their future so that optimism becomes a reality in retirement.”
The Harris Poll conducted 4,590 online interviews on behalf of Wells Fargo, including 2,660 working Americans age 18-76 whose employment was not impacted by COVID-19, 725 Americans age 18-76 whose employment was impacted by COVID-19, 200 high-net-worth American workers age 18-76, and 1,005 retired Americans. The survey was conducted Aug. 4-24, 2020.
