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Nearly a Third of Workers May Delay Retirement Due to COVID-19

Practice Management
Recent survey results found that the economic fallout from COVID-19 has altered the perception of when many workers plan to retire, but retirement confidence levels appear to be rebounding somewhat. 
 
The Wells Fargo/Gallup Investor and Retirement Optimism Index, based on interviews of more than 1,000 investors conducted May 11-17, found that 30% of employed investors say it’s “very or somewhat likely” they will delay the age at which they retire as a result of the recent economic downturn. A similar percentage (29%) think it’s likely they will work more than they intended in their retirement. 

The impact of the downturn has been especially pronounced on employed investors who are closer to retirement age—those aged 50 to 64. Wells Fargo notes that 40% of this group—compared with 22% of investors aged 18 to 49—say they are very or somewhat likely to work more than they intended to in retirement as a result of the downturn. Not surprisingly, older, nonretired investors are also more likely than those under 50 to say they will have to retire later than they originally planned. 
 
The pandemic has also compelled one in four investors to take on more financial responsibility for family members. The largest percentage (16%) reports providing greater financial assistance to an adult child, while 7% say they have assisted a parent and 7% another relative. As of the May survey, 27% of nonretired investors had suffered a loss of income or pay, 15% had been furloughed or temporarily laid off and 1% had been permanently let go. 
 
On the plus side, the so-called economic shutdown has caused most investors (64%) to spend less than usual, and as a result, one-third say their savings increased during this period, while a smaller percentage (21%) say their savings decreased.  
 
Most respondents also remain optimistic about reaching their five-year investing goals. Nearly 7 in 10 investors currently feel very (21%) or somewhat (48%) confident about investing in the stock market as a way to build wealth for retirement. Just 8% of investors see the current stock market environment as a time to decrease their stock holdings to protect against further losses. Nearly half say it’s a time to hold what they have and wait for the market to come back, while 35% see it as a buying opportunity. 
 
Additionally, most investors (64%) say setting aside more money in an emergency fund is a change they would make to their financial or investing strategy as a result of the coronavirus. Close to half say they are very or somewhat likely to spend more time creating a long-term financial plan. 
 
Retirement Confidence 
 
Meanwhile, a similar survey from Lincoln Financial shows that U.S. adults are feeling more financially confident about their retirement prospects, but there is some fluctuation. According to their findings, consumers’ retirement confidence rose to pre-COVID levels in April, dropped drastically in early May, but then rebounded by June. 

As of mid-June, 27% of working age U.S. adults felt very or extremely confident about three key aspects of retirement readiness:
 
  • being able to accumulate enough money so they can retire when they want;
  • being able to convert their savings when they retire into income that will last the rest of their lives; and
  • having enough money to maintain the lifestyles they want in retirement. 
The firm observes that a few factors may be at play: market performance, mixed feelings about the economy and unemployment rates. In March and April, the overall trend in retirement sentiment closely tracked stock market performance. The stock market hit a low in mid-March and saw another dip in early April, but rose during the remainder of April and throughout May.
 
Throughout the COVID-19 situation, the firm has also seen retirement confidence vary widely across age groups:
 
  • Pre-retirees: The 55-64 age group saw the biggest drop in confidence, from a high of 33% in the beginning of March, to 27% in the second half of March, and remaining consistent in early April. In the second half of April, confidence rebounded as the stock market rallied. In May, confidence continued to drop steadily, ending at 24%.
  • Mid-career: Those between 35 and 54 saw a smaller dip in confidence during March (23% in early March to 19% in the second half), but confidence shot up in April. In early May, confidence dropped to 17%, the lowest the firm has seen since the COVID-19 situation began. But by late May, confidence jumped to 27%.
  • Early career: The 18-34 age group saw a six-point drop between January and early March, coinciding with early signs of market volatility, but confidence shot up in late May to 33%, the highest the firm has seen in 2020 for this age group.