Teams at the Transamerica Center for Retirement Studies and the Alliance for Lifetime Income have tried to measure just how big of a hole the COVID-19 crisis has cut into Americans’ retirement planning confidence.
If the crisis leads to a permanent drop in workers’ tolerance for investment risk, that could cause stress for those workers, but it could also increase workers’ interest annuities.
- A copy of the Transamerica Center report is available here.
- A copy of Alliance for Lifetime Income report is available here.
- An article about how the COVID-19 crisis might affect workers’ interest in sources of guaranteed streams of retirement income is available here.
The Transamerica center team commissioned two surveys. One was an online survey, of 5,277 workers, that was conducted from Nov. 6 through Dec. 27. The other was an online survey, of 2,030 U.S. adults, that was conducted from April 16 through April 20.
The participants in the first survey were working full-time or part-time.
The participants in the second survey had been working full-time or part-time before the COVID-19 crisis flared. Some had been laid off or furloughed by the time they took the survey.
Here’s a look at the answers the participants in the second survey gave in response to the question, “How has your confidence in your ability to retire comfortably changed in light of the coronavirus pandemic?”
- Don’t know/not sure: 11%
- Improved: 13%
- Declined: 23%
- Stayed the same: 53%.
The answers suggest that 23% of the participants might be more interested in the idea of getting guaranteed lifetime retirement income from an annuity than they were before the crisis started.
But some of the participants might be fearful enough to question the stability of retirement services providers.
The Transamerica center analysts included a sampling of participants’ short answers to open-ended questions in the survey report. One 42-year woman — a member of Generation X — said she was “not to confident” about her ability to retire with a comfortable lifestyle.
She said her confidence about retirement had declined because, “The system could collapse.”
The Alliance for Lifetime Income Survey
Analysts at the Alliance for Lifetime Income, a group for annuity issuers and other organizations with an interest in guaranteed, lifetime streams of retirement income, organized their own online survey, of 1,231 U.S. adults ages 56 to 75, that was conducted from April 13 to April 20.
The alliance wanted to see how COVID-19 had affected the participants’ ideas about retirement.
All of the participants said they had $100,000 or more in investable assets.
Participants classified as “employed” were working full-time or part-time before COVID-19 came along. Some were laid off or let go because of the pandemic.
Participants classified as “retired” could be fully retired or working part-time.
Here’s how the participants in the alliance survey answered a question about the 2007-2009 Great Recession and the COVID-19 crisis had affected the participants’ confidence about having enough income to cover retirement expenses:
- I am a lot more confident: 2%
- I am a little more confident: 4%
- I am a lot less confident: 8%
- I am a little less confidence: 31%
- It hasn’t changed: 55%
Only 4% said the new crisis has had a “considerable negative impact” on their plans for retirement, and just 1% said it had a considerable negative impact on their health, or their family’s health.
But 11% said the pandemic has had a considerable negative impact on their emotions.
When the survey team asked directly about tolerance for retirement investment risk, 3% said they now have a higher level of risk tolerance, and 73% said their level of risk tolerance had not changed. Another 23% said their risk tolerance is now lower.
— Read If Cash is King, a Life Settlement is His Crown, on ThinkAdvisor.