Although the COVID-19 pandemic is proving most deadly for older Americans, they are coping better than younger generations with the challenge, both psychologically and financially.
According to the latest Age Wave Study, produced in partnership with Edward Jones and The Harris Poll, about to 90% of boomers (age 56-74) and the silent generation (age 75 and up) report doing very well or somewhat well dealing with the the pandemic, compared with 76% of millennials (24-39) and Gen Zers (18-23) and 85% of Gen Xers. Moreover, far fewer retirees report they’re not coping well at all compared to younger generations: — 5%-12% vs. 15%-24%.
Even more dramatic were the differences in the pandemic’s impact on personal financial security. Just 6% of those 75 and older and 16% of boomers reported that the pandemic negatively affected their financial security, compared to over 30% of Gen Zers and millennials and 24% of Gen Xers.
“Older people have been through more. They show more resilience and emotional intelligence and fortitude than any other generation.” said Ken Dychtwald, the founder and CEO of Age Wave in a recent webinar about the latest study. The company focuses on multiple issues relating to an aging population, including health care, finances, workforce and culture.
“The pandemic has significantly reduced the financial security of a quarter of Americans, with the greatest impact on younger generations,” according to the study, called The Four Pillars of the New Retirement.
The Four Pillars of the New Retirement study is based on a survey of 9,000 adults age 18 and older in the U.S. and Canada plus in-depth interviews with leading subject matter experts as well as online forums and focus groups and a review of more than 100 studies, articles and publications.
The Four Pillars
The four pillars are health, family, purpose and finances. Underpinning them all is the view that “retirement is no longer about the end of work,” said Ken Cella, head of Edward Jones’ Client Strategies Group, who joined Dychtwald in the webinar. ”It’s about a new beginning… Retirement is being redefined.”
But it may be delayed because of the COVID-19 pandemic. The study found that 29% of adults who plan to retire will delay retirement because of the COVID-19 pandemic, retiring on average 3.3 years later. Ten percent plan to retire earlier.
Overall, 68 million individuals have altered retirement timing and 20 million have stopped making contributions to their retirement savings, according to the study.
The COVID-19 pandemic “has accelerated some key retirement retirement trends and cast each of the four pillars in a new light,” according to the study’s introduction, written by Dychtwald and Cella.
Here are some of the highlights from the study’s four pillars that advisors may want to keep in mind when working with clients on their retirement plans and savings.
Americans’ health spans do not match their lifespans, leaving many older Americans living 10 years in poor health. Fewer boomers and the next generation, 75 and older, report very good to excellent physical health than younger generations, but more of them report very good to excellent mental health — over 60%, versus 50% or less for younger generations.
Alzheimer’s and other forms of dementia are the health issues that retirees fear the most in their later lives. About 13.8 million older Americans are projected to suffer from Alzheimer’s, according to the Alzheimer’s Association.
Many of those suffering dementia might spend their last years living in a nursing home, but those “skilled nursing facilities have taken a beating” during the pandemic, says Dychtwald. He expects to see a “surge” in home care.
Family is the greatest source of retirees’ satisfaction, support, joy and purpose. Seventy-one percent of retirees are willing to provide financial support to family members even if it jeopardizes their own financial future, but an almost equal number fear becoming a burden to their families.
Assets and money, however, are not the most important things retirees want to pass on to their loved ones. Seventy-five percent of retirees say the most important things they want to pass on are the intangibles: memories, values and life lessons.
The COVID-19 pandemic has led Americans to think more about their own mortality and that of family members. Nearly 30 million Americans have had end-of-life discussions for the first time.
“Retirement is a time for a reinvention … a new chapter in life,” said Dychtwald. But about one-third of those retired less than five years say they struggle with finding a new purpose.
An increasing number of retirees are filling the void by continuing to work, usually part time; about one-quarter do some kind of volunteer work; and many spend hours watching TV — the average for retirees is 48 hours a week.
Most report they derive the greatest sense of purpose from spending time with loved ones.
The COVID-19 pandemic, while most dangerous for older Americans, has also provided some with purpose — health care professionals coming out of retirement to help minister to the sick and grandparents helping with child care as well as other supports for family and friends. Technology is playing a bigger part keeping retirees connected to friends and family.
Retirees are better positioned than younger generations to withstand the impact of the COVID-19 pandemic because of Social Security, Medicare and savings and, for many, homeownership.
Pre-retirees tell a different story. According to the study, they are feeling less confident now about how much they’re saving for retirement than before the pandemic — 46% vs. 58% — and 20 million Americans have stopped making regular contributions to their retirement plans.
Health care costs, including long-term care costs, are the greatest financial worry for retirees.
The average newly retired couple at age 65 could spend more than $400,000 out of pocket for health and long-term care during their retirement, which includes Medicare and insurance premiums. Only 22% of retirees have budgeted for these costs, and 68% of pre-retirees say they have no idea what those costs will be, which is an opening for financial advisors to help.
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