COVID-19 is having a fundamental impact on retirement, according to a study by Principal. One in five respondents said the effects of the pandemic were “changing the definition of retirement,” including 23% of people who were already retired.
The study highlights an additional challenge retirees have today. In addition to the stresses of transitioning to a new life stage, the pandemic has introduced new challenges. Not being able to travel or see family members has left retirees wondering what they’ll do when they’re not working.
“Retirees share that they struggle with imagining their life in retirement and aren’t sure how they’ll spend their time,” according to the report.
Principal surveyed over 4,700 workers and retirees in three phases between December 2019 and September.
Sixty-five percent of workers said the pandemic will have an impact on their retirement, including 10% who said it will have a severe impact. Indeed, 12% of workers said they were planning to retire soon, but will now have to work longer.
“Nearly two-thirds of workers anticipate the pandemic will somehow impact their path to retirement,” Sri Reddy, senior vice president of Retirement and Income Solutions at Principal, said in a statement. “Uncertainty is part of life. The good news is we can take small measures to support our long-term resilience against unpredictable shocks in the future.”
Principal identified some of the steps workers and retirees are taking to build that resilience. Three-quarters said they will change their financial behavior to be more cautious. Nearly half of workers (49%) and over a third of retirees (37%) said they will spend less. A third of workers and retirees say they will check in with their financial accounts more frequently.
Retirees may feel limited in their ability to save, as only 14% said they will start saving more as a result of the pandemic, compared to 37% of workers. Workers were also more concerned about debt than retirees, with 33% expecting to pay down more debt, compared to 17% of retirees.
Just 17% of respondents said they plan to meet with their financial advisor, and 6% said they will look for an advisor to work with them. Those who have an advisor are largely satisfied with them. Forty-eight percent of respondents said their advisor’s communication has been excellent during the pandemic, and 28% said they don’t need any more communication than they’ve already received.
Some topics that consumers would like more information about, though, include investment advice (59%), economic outlooks (34%) and information about their current balance or rate of return (33%).
Some other findings from the report:
- Consumers became less concerned about volatility over the third quarter, and most declined to make changes to their investments.
- Workers and retirees are concerned about their communities during the pandemic.
- Workers cited small businesses’ survival among their top concerns, while retirees are worried about the safety of children, teachers and schools.
- 40% of workers and 60% of retirees have enough in their emergency savings to cover seven months of expenses.
- Consumers stressed the importance of saving early, noting this would be the top advice they would give their younger selves if they could.