Retirement preparations were already top of mind for many Americans when the coronavirus pandemic erupted earlier this year. Now, some find their ability to save for that major life event permanently affected by the outbreak, according to a new study by Wells Fargo.
The survey found that over the past eight months, retirement has become particularly challenging for workers whose employment has been negatively affected by the pandemic.
Fifty-eight percent of these workers said they did not know whether they had enough saved to retire because of coronavirus, compared with 37% of all workers surveyed.
Moreover, among these same workers, 70% worried about how to make sure they do not run out of money in retirement, 61% said they were much more afraid of life in retirement and another 61% said the pandemic had taken the joy out of looking forward to retirement.
Wells Fargo noted that retirement savings illustrated how COVID-19 has driven some workers even further behind. Working men in the study reported median retirement savings of $120,000, compared with $60,000 for working women.
Yet for those affected by the pandemic, men reported median retirement savings of $60,000, versus $21,000 for women.
“With individual investors now largely responsible for saving and funding their own retirement, disruptive events and economic downturns can have an outsized impact on their outlook,” Nate Miles, head of retirement for Wells Fargo Asset Management, said in a statement.
“Our study shows that even for the most disciplined savers, working Americans are not saving enough for retirement. The good news is that for many of today’s workers, there is still time to save and prepare.”
The Harris Poll conducted online interviews in August with 2,660 working Americans whose employment was not affected by coronavirus, 725 Americans whose employment was affected, 200 high-net-worth American workers with at least $1 million in household investable assets and 1,005 retirees, all in the 18-to-76 age range.
Effect of Pandemic on Women, Gen Z
The study found that women and younger generations were also falling behind. Only 51% of women said they were saving enough for retirement, or that they were confident they would have enough savings to live comfortably in retirement.
Women affected by the coronavirus had saved less than half for retirement than men and were much more pessimistic about their financial lives. Fifty-nine percent of these women were also less likely to have access to an employer-sponsored retirement savings plan, and 77% were less likely to participate.
Although Gen Z workers started saving at an earlier age and were participating in employer-based savings programs at a greater rate than other generations, 52% of this group said they did not know whether they would be able to save enough to retire because of the virus.
Half of Gen Zers reported that they were much more afraid of life in retirement because of the pandemic, and 52% said it had taken the joy out of looking forward to retirement.
Glass Half Full
At the same time, the study showed that despite a challenging environment, 79% of workers were very or somewhat satisfied with their current life, 79% were in control of their financial life, 95% were able to pay for monthly expenses and 86% felt confident that they could manage their finances.
Seventy-three percent of retirees and 69% of workers reported feeling in control or happy about their financial situation. In addition, nine in 10 workers and retirees said they could positively affect their financial situation, and similar numbers of both groups said they could positively affect how their debt situation progresses.
Eighty-three percent of workers said they could pay for a financial emergency of $1,000 without having to borrow money from friends or family.
Yet survey participants acknowledged that they could improve their financial planning. Slightly more than half said they had a detailed financial plan, and just 27% of workers and 29% of retirees had a financial advisor.
“The study found incredible optimism and resiliency among American workers and retirees, which is remarkable in the current environment,” Kimberly Ta, head of client service and advice for Wells Fargo Advisors, said in the statement.
“As an industry, we must help more investors make a plan for their future so that optimism becomes a reality in retirement.”
Importance of Social Security and Medicare
Despite an increasing shift to a self-funded retirement, 71% of workers surveyed, 81% of those negatively affected by the pandemic and 85% of retirees said the coronavirus had reinforced how important Social Security and Medicare would be or are for their retirement.
Overall, workers expected Social Security to make up about a third of their monthly budget in retirement. Even among wealthy workers, Social Security and Medicare factored significantly into their retirement plans, covering a median 20% of their monthly expenses.
The dependence by many on the programs also drives anxiety, according to the study.
Ninety percent of workers said they would feel betrayed if the money they paid into Social Security were lost and not available when they retire.
Some three-quarters of workers were concerned that Social Security would be raided to pay down government debt, and feared that it would be available when they retire.
Two-thirds said they had no idea what out-of-pocket health care costs in retirement would be.
Forty-five percent of workers surveyed said they were optimistic that Congress would make changes to secure the future of Social Security, and 23% of workers said they were willing to accept less from Social Security to help pay down the national debt.
Vast majorities of respondents also wanted politicians to help with retirement, saying the presidential candidates should make it a top priority and that Congress needed to make it easier for workers to access tax-friendly retirement plans.
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