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Survey: COVID-19 Impact Reveals Desire for Retirement Tax Planning Help


Considering the financial impact of COVID-19, many Americans are reevaluating their plans for retirement and are interested in learning more about how to use income sources to maximize retirement income and minimize taxes, according to new survey results.

Findings in Nationwide Retirement Institute’s 2019 Tax-Efficient Retirement Income survey reveal that a third of current retirees (35%) did not consider how taxes would affect their retirement income when planning for retirement. As a result, many express regrets, with nearly a third of retirees (32%) reporting they wish they had done more to prepare. 

The survey also found that nearly two in five future retirees (38%) are terrified of what taxes will do to their retirement income, yet 35% rarely consider the taxes they are paying or will pay in retirement. What’s more, less than half of current retirees (43%) say they know how to leverage taxable, tax-deferred and tax-free accounts. 

“While being in retirement can reduce or eliminate several expenses in older adults’ budgets, their tax bill may not be one of them,” notes Eric Henderson, president of Nationwide’s Annuity business. “The data clearly illustrates that retirees aren’t always strategically preparing for—or even thinking about—taxes in retirement, and as a result, may be paying thousands of dollars more than needed.”

COVID-19 Impact

As for the impact of COVID-19, roughly two in five (38%) respondents said the pandemic has impacted their retirement plans by either having to retire later than planned, not being able to retire at all now or being forced to retire. Plus, 41% say they are currently reevaluating their retirement plans to assess the financial impact. 

Moreover, in light of the pandemic, 63% say it is more important now to develop a strategy to address taxes in retirement and 59% worry more now about what taxes will do to their income in retirement than they did before. These are among the findings revealed by a supplemental tax survey conducted online in May 2020.   

And with the changes under the CARES Act that eased the hardship distribution rules and increased withdrawal limit for those impacted by the crisis, two in five Americans with a 401(k) (39%)—including more than half of Millennials (53%)—now say they are likely to withdraw money from their retirement plan early because of the pandemic. This finding on Millennials appeared to be somewhat of an outlier as compared to the other generations. 

Help Wanted

A separate COVID-19 Financial Survey by Nationwide conducted online in April 2020 finds that a quarter (24%) of Americans are seeking help by engaging a financial adviser for the first time ever as a result of the pandemic. 

The firm suggests this is an opportunity for financial advisers to discuss tax planning in retirement and educate clients on the best strategies to reduce unexpected taxes on combined income sources. In fact, the broader 2019 survey shows that current and future retirees prefer using a financial adviser to learn about retirement planning (57%) versus reading printed materials (46%) or doing independent research online (45%). 

Majorities of both current and future retirees are interested in knowing more about general tax planning, according to the findings. Future retirees are also more likely than current retirees to want to learn more about a variety of financial topics, including:

  • how taxes on Social Security (77%) and Medicare (76%) impact retirement income; 
  • taxation of employer-provided retirement plans (70%); 
  • the tax impact of required minimum distributions (79%); and 
  • Roth conversions (60%).

Additionally, the survey notes that 42% of future retirees would switch financial advisers for someone who could help them plan for their taxes in retirement, such as how to correctly use income sources to maximize retirement income and minimize taxes. 

The Tax-Efficient Retirement Income survey was conducted online by the Harris Poll on behalf of the Nationwide Retirement Institute between April 18 and May 7, 2019, among 1,301 U.S. adults age 50 or older who currently collect or plan to collect Social Security benefits, have at least $150,000 in investable assets, and are either currently retired or plan to retire within the next 10 years. 

The COVID-19 tax survey was conducted online within the U.S. between May 15-19, 2020, among 2,026 adults. The COVID-19 Financial survey was conducted online within the U.S. between April 8-10, 2020, among 2,042 adults. 

Both surveys were conducted by the Harris Poll on behalf of Nationwide.