Does the Pandemic Have a Silver Lining for Retirement Planning?

While it seems clear the pandemic has caused financial strain to many, a new study suggests there are signs of hope when it comes to retirement planning activity.

According to Allianz Life’s 2021 Retirement Risk Readiness Study, nearly half (49%) of respondents to the firm’s survey said they cannot even think about saving for retirement now because they are just trying to get by day-to-day and 56% said that stock market swings are making them nervous about their retirement savings. However, nearly two-thirds (65%) say they are now paying more attention to what they are saving and spending. 

Moreover, the pandemic apparently has motivated those nearest to retirement to review their current retirement planning activity more often. These near retirees are more active in pursuing a variety of strategies, including: 

• saving enough in a retirement account (29% versus 23% in 2020); 
• diversifying their retirement savings (42% versus 27% in 2020); 
• researching expenses and risks associated with retirement (43% versus 35% in 2020); 
• making a formal plan with a financial professional (37% versus 29% in 2020); and 
• purchasing a product that provides a guaranteed source of retirement income (38% versus 30% in 2020).

Rise in Unexpected Retirement 

The survey also found a “troubling rise” in early retirements and that most are unprepared for the risk. According to the findings, more than two-thirds of respondents (68%) said they retired earlier than expected—up from 50% who acknowledged earlier-than-expected retirement in last year’s study. And similar to 2020, the majority said they had to retire for reasons outside of their control, including health care issues (33%, up from 25% in 2020) and unexpected job loss (22%, down from 34% in 2020). 

Additionally, Allianz found that more than 4 in 10 (43%) respondents said they are unable to put away anything for retirement right now (up from 37% in 2020), and a similar amount (42%) feel they are too far behind on their retirement goals to catch up (up from 31% in 2020).

Respondents also continue to have unrealistic expectations when it comes to managing an early end to their employment via working in retirement, the firm notes. The findings show that a full 70% of non-retirees think it is likely they will work at least part-time in retirement, up from 65% in 2020. Yet, when asked if they actually are working at least part-time, only 6% of respondents verified that claim, nearly equal to the 7% reported in 2020.

“Black swan events like this global pandemic are often the trigger that convinces people they need to take a more proactive approach to managing risks that may come in retirement,” says Kelly LaVigne, vice president of Consumer Insights at Allianz Life. “In that respect, it is encouraging to see that many Americans are taking this as a wake-up call and adding more risk management measures, including sources of guaranteed and supplemental retirement income, into their retirement planning process.”

The findings are based on an online survey conducted in December 2020 among a nationally representative sample of 1,000 individuals age 25 or older in the contiguous U.S. with an annual household income of $50,000+ (single) / $75,000+ (married/partnered) or investable assets of $150,000.