A quarter of workers currently employed or recently unemployed say their confidence in their ability to retire comfortably has declined in light of the coronavirus pandemic, according to a study by the Transamerica Center for Retirement Studies.
“Workers across generations are at risk of not achieving a financially secure retirement — an issue of major concern long before the coronavirus pandemic,” said Catherine Collinson, CEO and president of the Transamerica Center and the nonprofit Transamerica Institute, which are funded by contributions from Transamerica Life Insurance Co. and its affiliates.
“Now, the negative economic effects of the pandemic are further threatening retirement savings and security,” she said. “The long-term implications of the coronavirus pandemic and recession on retirement security have yet to be fully realized. However, the financial vulnerabilities among workers across all generations are becoming clear.”
The study, “Retirement Security Amid COVID-19: The Outlook of Three Generations,” examined the retirement risks faced by millennials, Generation Xers and baby boomers.
The survey found:
- Almost six in 10 workers have experienced one or more impacts to their employment situation as a result of the pandemic, including reduced work hours, reduced salaries, layoffs, furloughs, and early retirement.
- If the pandemic negatively impacts their finances, workers say they will fall back on savings, followed by credit cards, unemployment benefits and stimulus money. One in six workers cite reliance on a significant other’s or spouse’s income, withdrawal from a retirement account, and/or a loan from a friend or family member.
- One in three millennial workers have and/or plan to dip into their retirement accounts, including 22% who have already taken a loan and/or early withdrawal, and 20% who plan to do so. By comparison, only 15% of GenXers and 10% of baby boomer workers have already done so and/or plan to do so.
“The pandemic’s economic fallout should not be underestimated,” Collinson said. “For some workers, the current recession may be a major setback and for others it could be a knock-out blow.”
The study offers suggestions that could help improve workers’ retirement prospects, including:
- Financial planning, creating a budget, prioritizing expenses, setting short- and long-term goals, and developing a retirement strategy. Less than one in four workers have a written financial strategy for retirement.
- Employers should offer flexible work arrangements and maintain current employee benefits. Maintaining retirement, health and welfare benefits can provide insurance protections, mitigate out-of-pocket expenses and help employees save for the future.
- Policymakers, industry and employers should promote and increase awareness of available relief programs such as unemployment insurance, stimulus funds, small business loans and access to health care insurance — and make it as easy as possible for workers to access them.
“Workers’ ability to achieve a secure retirement highly depends on a robust employment market, the availability of retirement, health and welfare benefits, the preservation of safety nets such as Social Security and Medicare,” Collinson said. “Even amid the pandemic and current hardships, we are presented with an opportunity to come together to re-imagine our world — including how we live, work, retire and age with dignity.”