The pandemic has prompted 3 in 10 black Americans and nearly 4 in 10 Asian and Hispanic respondents to change or consider changing when they will retire, according to a recent study by the Society of Actuaries.
The organization’s second iteration of Financial Perspectives on Aging and Retirement Across the Generations, which focuses on African American, Asian and Hispanic respondents, finds thast among those who have changed their retirement plans because of the pandemic, two-thirds of black and Hispanic respondents and 61% of Asian respondents report that they are now planning on retiring later than originally planned. Across all retirement risks, Hispanic respondents report the highest levels of retirement-related concern, mostly worrying about:
- not having enough money to pay for adequate health care;
- not being able to manage their finances;
- not being able to maintain their standard of living; and
- the value of their savings/investments not keeping up with inflation.
The same can be said for younger respondents across all groups.
Pandemic’s Impact
The study further observes that the financial impact of the pandemic has been uneven. According to the findings, 57% of Hispanic respondents report that the COVID-19 pandemic had an overall negative effect on their finances, and almost half experienced a job loss or pay decrease. In contrast, 37% of black and 35% of Asian respondents reported a negative impact on their finances.
In reaction to the pandemic, the most common financial action has been a reduction in spending. The study notes that about a quarter of black and Hispanic respondents significantly changed their investments—even among the younger generations.
One positive is that changes to employer-sponsored plans have been uncommon, the study notes. Even so, SOA observes, even small proportions withdrawing funds (5% of black, 4% of Asian and 8% of Hispanic respondents) and reducing or stopping contributions (4% of black, 7% of Asian and 8% of Hispanic respondents) can have long-term impacts on financial security.
Financial priorities were also found to be slightly different among these groups. While Asian American respondents are more likely to say saving for retirement is their top financial priority, black and Hispanic respondents are more focused on being able to afford everyday bills and building up emergency funds.
Moreover, in each group, younger generations are more likely to prioritize many of the financial issues—especially saving for retirement, building up an emergency fund, saving for a home, saving for children’s education and paying off student loans, the study notes.
Retirement Preparedness
Despite concerns expressed about the pandemic and many respondents saying they plan to delay their retirement, the findings in relation to those who think they are prepared for a financially secure retirement were more mixed. The study found that less than half of black (49%) and Hispanic (43%) respondents think they are on track in planning for retirement, while about 3 in 10 think they are not on track. For Asian American respondents, 58% agree that they are on track, while 16% think they are not.
Those who believe they are on track for retirement most commonly came to this conclusion using their own calculation or research, the study notes. However, about 20% of black and Hispanic respondents say they rely on their “best guess or gut feeling.”
Climate Concerns
When it comes to climate change threatening financial security in retirement, 54% of Hispanic, 45% of black and 40% of Asian American respondents are at least somewhat concerned. Yet, black and Hispanic respondents were more likely than Asian American respondents to say they are “very concerned.” In addition, younger respondents are more concerned about the effects on their retirement, but concern is highest among black and Hispanic Millennials and Gen Xers.
When asked about the specifics of how climate change could impact retirement—such as raising the cost of living, taxes and insurance costs—Hispanic respondents agree most often that these various outcomes could occur, the study notes. Again, younger generations are also more likely to think these outcomes could affect their retirement.
While this report does not offer specific recommendations, a separate report from the SOA, Exploring Financial Fragility Across Generations, Race and Ethnicity, suggests that for those with low financial fragility, areas for improving retirement security include:
- optimizing savings either on their own or through an employer;
- understanding how much to save and effectively managing investments;
- employing other preretirement risk management programs; and
- not using retirement funds or retiring too early.
The findings in the report are based on a survey conducted by Greenwald Research from Jan. 5–27, 2021, among 2,017 Americans. This report presents the oversample data of 520 black American, 516 Asian American, and 495 Hispanic respondents.
