What's Happened to Retirement Expectations During the Pandemic?

Most kept on track to retire; others had their savings—and hopes—derailed

Stephen Miller, CEBS By Stephen Miller, CEBS April 28, 2021

More than a year after the start of the COVID-19 pandemic, workers are focusing on the future—including sizing up how their prospects for retirement have changed. 

For many, the pandemic hasn't harmed their finances and may have increased their ability to save, given fewer spending opportunities. Meanwhile, others found it necessary to withdraw funds from their retirement account so they could pay their bills.

A Roller Coaster Year

According to Fidelity Investments' 2021 State of Retirement Planning Study:

  • 33 percent estimate it will take two to three years to get back on track, due to such factors as job loss, reduced working hours or retirement plan withdrawals.

Most, however, are still confident they'll be able to retire when and how they want.

The survey was conducted Feb. 5-12, with responses from 1,204 employed adults with at least one investment account.

"This past year has been a roller coaster, but for those Americans with a retirement plan, it should come as a relief to know the fundamentals remain sound," said Melissa Ridolfi, senior vice president of retirement and cash management at Fidelity Investments. "Although the survey indicates 36 percent of Americans are more concerned now than at the start of the pandemic on their ability to maintain a nest egg in retirement, we saw retirement savings accounts reach record levels in the fourth quarter of 2020."

Fidelity also had record levels of planning engagements with clients throughout the year, Ridolfi said, demonstrating the faith that many retirement savers have in their financial future.

Most Workers Still on Course

Despite the drop-off in business activity during the pandemic, only 22 percent of workers adjusted the age at which they plan to retire, including 17 percent planning to retire later than they had anticipated and 5 percent retiring sooner—for many, because they lost their jobs—according to the nonprofit Employee Benefit Research Institute (EBRI), which recently released its 2021 Retirement Confidence Survey report.

EBRI's and Greenwald Research's 2021 survey of 1,507 U.S. workers and 1,510 retirees was conducted Jan. 5-25.

While many workers were forced to cut back on their contributions to 401(k) or similar defined contribution plans, workers overall remain optimistic, with 72 percent expressing confidence in their ability to retire comfortably—up 3 percentage points from a supplemental survey EBRI conducted in March 2020.

More than 80 percent of workers who are offered a workplace retirement savings plan are satisfied with the benefit, the survey found.

More than 80% of workers offered a workplace retirement plan are satisfied with the benefit, EBRI found.

"Even with changes in the labor market, workers' confidence in their ability to live comfortably in retirement remains high overall," said Craig Copeland, EBRI senior research associate and co-author of the report. "However, while resilience may be the watchword for 2021, 3 in 10 workers say the pandemic has negatively impacted their ability to save for retirement, due to reduced hours, income or job changes."

Respondents most likely to have their savings impaired were low income and not married, or who have had problems with debt, Copeland said.

[Related SHRM article: Most 401(k) Plans Weathered 2020 Without Reducing Employer Contributions]

A Good Savings Year, for Some …

Workers who were not laid off, furloughed or who did not have their hours reduced—including most professionals and knowledge workers—were likely to find that they had more money to save, as the economic shutdown meant fewer opportunities to shop, travel and dine out. Fully remote workers also could save on child daycare, commuting and clothing-related costs.

Among workers EBRI surveyed, 30 percent made changes to their plan in the past year. Among those who did, 60 percent increased the amount they contribute, while 25 percent said they reduced or stopped contributions.

"Showing further resilience, just 1 in 10 workers who have saved for retirement say they have taken a loan, hardship distribution or early withdrawal from their workplace retirement plan in the past 12 months," Copeland said, despite COVID-19 relief legislation making it easier to withdraw funds from 401(k) accounts, penalty free.

… But a Bad Savings Year for Others

Some workers, however, weren't as fortunate as most. By the end of 2020, there were 10 million fewer jobs in the U.S. than before the pandemic began, CNBC reported, citing government figures.

EBRI's survey found that among those who were not permanently laid off but whose income had been negatively affected:

  • 18 percent said their hours or pay had been reduced since Feb. 1, 2020.
  • 10 percent said they were furloughed/temporarily laid off.

Half of all these workers were less confident about having enough money to live comfortably throughout their retirement years.

"If you are closer to retirement, the good news is it's never too late to start planning for your future, regardless of age or income," said Fidelity's Ridolfi. "Creating a plan for retirement can lead to a greater sense of confidence and control and ultimately give people a better feeling about where they stand at any age."



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