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How COVID-19 Is Hurting Workers’ Retirement Prospects

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Stock image of dollar bill cut up like a puzzle with COVID-19 designs on top of it (Image: Shutterstock)

The costs to Americans from the coronavirus pandemic continue to emerge, casting a pall over the year-end holiday season.

Twenty-one percent of U.S. workers in a new survey say their confidence in their ability to retire comfortably has declined, and only 27% are highly confident they will be able to fully retire with a comfortable lifestyle, according to Transamerica Center for Retirement Studies, a nonprofit organization.

“Before the pandemic, the retirement prospects for many workers was iffy at best,” Catherine Collinson, chief executive and president of Transamerica Institute and TCRS, said in a statement.

“It will take years for many workers to financially recover — and some may never recover. Help from policymakers is needed to strengthen the U.S. retirement system,” Collinson added. 

In the meantime, much-needed relief after months of congressional dithering appears imminent. The Senate and the House were scheduled to vote Monday on a $900 billion pandemic relief measure agreed over the weekend.

The Harris Poll conducted the survey in October among 1,173 workers who are currently employed, recently unemployed and/or furloughed amid the pandemic. It is a supplement to TCRS’ 20th Annual Retirement Survey conducted in late 2019 of 5,277 workers.

Asked what should be the priorities for the president and Congress, workers’ responses mainly involved strengthening safety nets and improving health care. Respondents also cited these priorities: 

  • Expanding access to employer-sponsored retirement plans, other savings programs – 36%
  • Implementing financial literacy curriculum in schools – 34%
  • Increasing access to affordable housing – 34%
  • Expanding the Saver’s Credit – 32%
  • Creating incentives for individuals to obtain training and education – 32%
  • Allowing employers to match employees’ student loan payments as a contribution in their retirement accounts – 29%

Short- and Long-Term Toll 

The October survey gauged the effect of the pandemic on workers’ employment and finances. 

“Workers share many retirement-related risks; however, by increasing an understanding of the differences across demographic segments, we can identify solutions to help those in greatest need,” Collinson said. 

Fifty-two percent of workers surveyed have experienced job loss, furloughs, reduced hours, reduced pay and/or early retirement early. 

LGBTQ workers have been hit especially hard. Sixty-five percent have experienced one or more negative effects to their employment, compared with 50% of non-LGBTQ workers. 

As a result of the pandemic, 33% of all workers have already taken a loan and/or a withdrawal from their qualified retirement account, or plan to do so, with 59% of LGBTQ workers, 50% of urbanites, 43% of millennials and 42% of men most likely to do so.

Credit card debt may pose a threat to retirement security for many workers, especially Gen-Xers, the survey found. 

Thirty-four percent of all workers see paying off credit card debt as a financial priority, including 45% of Gen-X workers. Moreover, if their finances have been or were to be negatively affected by the pandemic, 35% of the latter say they would rely on credit cards. 

Not all the survey findings were downbeat.

Three in four workers in the study say they are saving for retirement through their current employer’s 401(k) or similar plan, a former employer’s plan and/or outside of work. Significantly more full-time workers than part-timers are likely to be saving, according to the survey. 

In addition, 47% of workers say saving for retirement is a priority despite competing financial priorities. Those most likely to prioritize saving for retirement are baby boomers, college graduates, full-time workers and workers who live in the suburbs.

Improvement Needed

The survey found that only 27% of respondents have a written financial strategy for retirement. Those more likely to have one are LGBTQ workers, college graduates and urbanites. 

The pandemic has underscored the importance of having financial and medical-related legal documents in place, but just 22% of workers have a medical power of attorney or proxy. 

College graduates are likelier than non-college graduates to have one. Similarly, 27% of college graduates have a financial power of attorney, compared with only 17% of non-college graduates. 

“From a societal level to individual households, the pandemic has disrupted nearly every aspect of our lives and laid bare weaknesses in our retirement system,” Collinson said. 

“As we navigate the pandemic with an eye toward the future, policymakers, industry, employers and individuals have a tremendous opportunity to work together and create a stronger, sustainable, and inclusive system in which everyone has the ability to live, work and retire with dignity.”