Despite the ongoing pandemic, a new study finds that most retirees say their confidence in their ability to maintain a comfortable lifestyle has remained constant.
A June 2020 supplement to the Transamerica Center for Retirement Studies’ 20th Annual Retirement Survey reveals that three in four retirees say their confidence in their ability to maintain a comfortable lifestyle through retirement has stayed the same. But while this stability in retirement confidence seems to be good news, the report underscores that only 29% are “very confident” in their ability to do so.
“Retirees, in some ways, may be more resilient in this economic downturn than employed workers. Most have guaranteed income in the form of Social Security and access to health insurance coverage through Medicare. Unlike employed workers, most retirees do not have a job to lose,” says Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Nevertheless, they are still susceptible to both the health and economic effects of the pandemic.”
When asked what sources of funds they have used or would use if their finances have been or would be negatively affected by the pandemic, retirees’ most frequently cited source is savings (56%). Other often mentioned sources include credit cards (18%), withdrawals from retirement accounts such as a 401(k), 403(b) or IRA (18%), and CARES Act stimulus money (18%).
Regarding sources of income over the course of their retirement, most retirees (69%) indicate that Social Security will be their primary source, while 18% cite retirement accounts and personal savings, including a 401(k) or similar accounts/IRAs (7%), and other savings and investments (11%). Only 1 in 10 retirees cite a company-funded pension plan as their primary source of income.
Pre-pandemic Vulnerabilities
Despite the relative confidence, many retirees cited financial vulnerabilities before the pandemic. Fewer than half of retirees (47%) agree that they have built a large enough retirement nest egg, of whom only 15% “strongly agree” and 32% “somewhat agree.” In addition, 17% “somewhat disagree” and 30% “strongly disagree.”
In addition, Transamerica’s 20th annual retirement survey conducted in late 2019 reveals that nearly 6 in 10 retired sooner than planned (58%). Among them, 51% cited employment-related reasons such as job loss, organizational changes, general unhappiness, or an incentive or buyout. Forty-eight percent cited ill-health and/or family-related reasons. Among those who are fully retired, the median age at which they retired was age 63, while more than half of the fully retired (54%) retired before age 65.
“Many retirees were forced into retirement before they were ready, which shortened their working years, extended their time in retirement, and left them more financially vulnerable,” Collinson notes. “Retirees have been getting by, but they risk outliving their savings.”
Transamerica also found that retirees have saved relatively little. The study notes that the estimated median in household savings is $45,000 (excluding home equity), while 16% of respondents report that they do not have any household savings.
In addition, many retirees are still paying off household debt. Among the 46% of retirees who have non-mortgage debt, the estimated median is $3,000. Among the 23% of retirees who have mortgage debt, the estimated median is $42,000.
“Before the pandemic, retirees were living with limited income and savings. Now, amid the pandemic, a pressing question is whether and how they would be able to contend with a major financial setback such as long-term care expenses,” Collinson observes.
The 20th annual survey of retirees was conducted online within the U.S. by The Harris Poll on behalf of TCRS from Nov. 13 to Dec. 4, 2019, among a nationally representative sample of 2,040 self-identified retirees, including 1,841 fully retired and 199 semi-retired. The June 2020 supplemental survey was conducted online from June 18–22, 2020, among a nationally representative sample of 2,001 U.S. adults.
