IntroductionBeyond the health impact, COVID-19 has created unprecedented economic uncertainty. The pandemic has roiled the economy and devastated Americans’ savings and wallets. And it appears there is no end in sight. Amidst the current surge in COVID-19 cases across the country, states have revived restrictions and stay-at home directives. With the unemployment rate remaining above 10%, the rise in cases and updated policies threaten to make the coronavirus-related layoffs and furloughs permanent. In a country where most people live paycheck to paycheck, this could be devastating. Most Americans lack the savings to last them even three months. Of course, that savings gap is all the more dramatic when it comes to saving for retirement. And with the havoc the pandemic has wrought, that savings gap seems likely to worsen. Beyond the hit to personal savings, the pandemic is also taking a toll on Social Security’s coffers. The record unemployment rates since March of this year mean that the Social Security fund (which depends on payroll taxes) is taking the hit. More, the CARES Act allows companies to delay Social Security. And while this doesn’t affect current beneficiaries, it highlights the pandemic’s impact on the already increasing Social Security funding deficit. As Federal Reserve vice chair Randal Quarles recently said: “There’s probably never been more uncertainty.” So it’s unsurprising that Americans are more worried than ever about their future and what retirement today will look like. According to the July 2020 SimplyWise Retirement Confidence Index, 62% of Americans are more concerned about retirement today compared to how they were feeling about it a year ago. This is up from 56% in our May 2020 Index. The survey also found that 70% of people in their 50s—who are nearest to retirement—are more concerned about retirement today. The study was conducted as an online, random sample survey of 1,128 Americans ages 18+ between July 3-6, 2020. It explored how people are looking at retirement, Social Security, and savings today, particularly in light of COVID-19. We break down our findings, from changing rates of postponing retirement to how people are drawing from retirement savings during the pandemic.
- 62% of Americans more concerned about retirement today compared to a year ago. (This is up from 56% in the May 2020 Index.)
- Half of Americans believe they will outlive their retirement savings.
- 72% now plan to work in retirement. (Up from 67% in May.)
- Only 58% of those in workforce are making what they were making prior to COVID-19. (67% for White Americans, 50% for Hispanic Americans, 45% for Black Americans.)
- One in five Americans in their 60s have lost their jobs or been furloughed due to COVID-19.
- 24% are now planning to tap their 401(k), including 41% of those laid off due to COVID-19.
- 63% of Black Americans could not come up with $500 cash today (without selling something or taking out a loan)—compared to 35% of White Americans.
- 1 in 5 Americans could not last more than 2 weeks off their savings.
- 48% of Black Americans and 43% of Hispanic Americans could survive less than a month on savings (versus 33% of White Americans).
- Half of Americans say another stimulus check is very important to their finances.
- 72% (83% of Democrats vs. 60% of Republicans) believe a recession will continue into the next year.
Americans’ concern over retirement today is at an all-time high
Declining retirement sentiment
An overwhelming 62% of people are more concerned about retirement today, compared to a year ago. That is up from the 56% who reported being more concerned in the May 2020 SimplyWise Index. For those not yet claiming Social Security benefits, financial concerns rank among the greatest anxieties around retirement.
The reported concern was worst for those closest to retirement. For Americans in their 50s, 70% said they are more concerned about retirement than at this time last year. Seniors also expressed increased anxiety about their retirement. Sixty-one percent of people in their 60s are now more concerned than they were a year ago. Compare this to two months ago, when just 50% of people in their 60s said they were more concerned for their retirement. For those in their 70s and 80s, 41% are now more concerned about the rest of their retirement, compared to a reported 34% in May.
Americans’ concern over retirement today is at an all-time high
Declining retirement sentimentAn overwhelming 62% of people are more concerned about retirement today, compared to a year ago. That is up from the 56% who reported being more concerned in the May 2020 SimplyWise Index. For those not yet claiming Social Security benefits, financial concerns rank among the greatest anxieties around retirement. The reported concern was worst for those closest to retirement. For Americans in their 50s, 70% said they are more concerned about retirement than at this time last year. Seniors also expressed increased anxiety about their retirement. Sixty-one percent of people in their 60s are now more concerned than they were a year ago. Compare this to two months ago, when just 50% of people in their 60s said they were more concerned for their retirement. For those in their 70s and 80s, 41% are now more concerned about the rest of their retirement, compared to a reported 34% in May.
There was also a divide along political lines. The Index found that Republicans are somewhat more optimistic about their retirement prospects. In fact, 46% of Republicans feel similarly or better about retirement compared to how they felt at this time last year. That is compared to 31% of Democrats who feel similarly or better compared to this time last year—and 69% of Democrats who are now more concerned about retirement.
And there was a gender divide in retirement sentiment. Two in three women reported feeling more concerned about retirement today. On the other hand, just 56% of men feel more concerned about retirement today.
Financial and medical concerns for retirementAmericans’ greatest concerns for retirement were largely consistent with those found in our May survey. Half of respondents were concerned that they would outlive their retirement savings. Another 55% were concerned that Social Security would dry up before they retired. Four in ten Americans fear they will not be able to retire at all. Forty-one percent of Democrats versus 27% of Republicans were concerned they not be able to retire at all. Paying everyday bills, particularly medical bills, remains a great anxiety. Fifty-two percent of people in their 50s reported being concerned about their ability to pay for medical expenses in retirement. And 42% of people in their 50s worry about paying daily living expenses in retirement. Perhaps their concern is merited. For those who are already retired, over a quarter reported they worry about their ability to pay daily living expenses. And repaying lenders remains a concern, with 28% worried about having too much debit in retirement. Of course, beyond financial concerns, there are other realities to face in entering the next phase of one’s life. As in the recent May survey, a quarter of respondents worried about feeling bored or lonely in retirement. In fact, the latest census revealed that approximately one in five adults aged 65 to 74 lives alone. That figure doubles to around four in ten people for those 85 and older. While living alone does not necessarily translate to isolation, the reality is that social contact does typically decrease with age. This can be attributed to factors like decreased health or mobility; family living far away; the death of friends or family members. This isolation can lead to loneliness, which can have a severe impact on one’s health and even finances in retirement. For example, an AARP study revealed that social isolation costs $6.7 billion to Medicare every year. The study found loneliness to be a risk factor in health conditions including arthritis, high blood pressure, heart disease, and diabetes.
Declining quality of life in retirementAccording to the Social Security Administration, retirement benefits are designed to replace approximately 40% of a worker’s wages in retirement. However, a majority of Americans, particularly those closest to retirement, plan to rely on Social Security for a majority of their retirement income. People in their 50s and 60s on average expect Social Security to represent over 50% of their retirement income. Millennials (born between 1982-2000) somewhat more conservatively believe Social Security will be 45% of their retirement income. Considering the average Social Security benefit is $1,503 per month and the average American spends $5,102 per month, it’s no surprise that most Americans expect their quality of life to decline in retirement. In fact, half of all respondents believe their quality of life will suffer after they start collecting Social Security. For those not yet collecting Social Security benefits, 60% believe those benefits won’t allow them to maintain the same quality of life they enjoy today. While this concern varied by age, it was most pronounced for those in their 40s and 50s. The study found that 65% of those in their 40s believe their quality of life will decline in retirement. For people in their 50s, 60% believe life quality will worsen. And women were less confident than men that their savings and benefits would get them through retirement. Just 42% of women, compared to 52% of men, believed they could maintain their same lifestyle in retirement. And indeed, that concern may be merited. For those retired already, 1 in 3 are now worried they won’t be able to maintain their same quality of life throughout their retirement. The overreliance on Social Security in retirement could hurt many in the future. In fact, the Social Security Board of Trustees reported earlier this year that its funds will be depleted by 2035. That does not translate to the end of Social Security. But it does mean its cash reserves will be gone, and it will only be able to dole out what it collects in taxes each year. If that happens, according to the Trustees, the Administration will only be able to pay beneficiaries 79% of the money they are owed. Its reserves are running out due to demographic trends. Generation X (the generation behind Baby Boomers) is much smaller than the Boomers swelling the ranks of retirement beneficiaries. Translated: there are less workers paying in taxes to fund those benefits. Therefore, current tax revenues won’t cover benefits and Social Security will have to tap the surplus. Add the current soaring unemployment numbers and it becomes hard for Americans to imagine what the future of Social Security—and their retirement—will look like.
More Americans are delaying retirement and Social Security
So what does all of this mean for Americans nearing retiring age today? Well, many Americans are interpreting the current crisis as a call to postpone retirement. One in four are planning to postpone retirement altogether, as in the May 2020 survey.
For many others, retirement simply won’t mean the end of work. The July Index found that more Americans than ever are planning to work into retirement. Today, 72% of workers plan to work after they claim Social Security retirement benefits—up from 67% this May. The rise in delaying retirement may be attributed to the fact that only 58% of workers surveyed are making what they made prior to COVID-19. That number is worse for minorities; just 50% of Hispanic Americans and 45% of Black Americans are at the same income level they were pre-COVID. By comparison, 67% of White Americans are at the same income level they were pre-COVID.