What You Need to Know
- According to the Center for Retirement Research, the pandemic has had only a modest effect on Social Security.
- Lack of savings in workplace plans was an issue long before COVID struck.
- Older workers were less likely to be laid off in early in the pandemic than younger ones.
As the pandemic wore on and the economic fallout worsened, survey after survey tried to quantify the impact on Americans’ retirements. However, a paper from the Center for Retirement Research at Boston College asserts that the pressures on retirement today are as bad as they were before the pandemic. Social Security, employer-sponsored retirement plans and the labor market for older workers have held up about as well as they did last year — meaning there is still work to be done to improve retirement outcomes.
Alicia Munnell, director of the Center for Retirement Research at Boston College (CRR), and Anqi Chen, assistant director of savings research at CRR, dispute the Social Security actuaries’ revised Trustees Report, which “[characterized] the impact of the pandemic and recession as ‘significant.’”
Munnell and Chen acknowledge that many assumptions about the future of the program have changed as a result of the pandemic.
“Mortality is up, fertility and immigration are down, disability incidence is down in 2020 and then up for the next three years, unemployment is up, real wages are down then up, and real interest rates are down,” they wrote. However, the actual “impact on Social Security finances appears to be modest,” with the effects of the pandemic and ensuing recession washing out by 2025.
Regarding employer-sponsored plans, “problems existed before COVID; COVID had little impact on retirement resources; and the pre-COVID problems persist,” they wrote.
Between 2016 and 2019, a period marked by strong markets and economic growth, the typical working household with a 401(k) saw balances increase by less than $10,000 to $144,000 in 2019.