Americans Feel Less Prepared for Retirement than Before the Pandemic
We asked our readers how the COVID-19 pandemic affected their retirement planning. Survey responses showed how COVID-19 is affecting retirement savings and spending, but we learned more. Our readers shared stories of how they were affected mentally and emotionally by the pandemic and how they adjusted retirement plans to adapt.
Impacts of COVID-19 on retirement: 49.8% Said COVID dented retirement plans
How has COVID-19 impacted your retirement or retirement planning?
Our survey results were nearly split down the middle when we asked if COVID-19 impacted retirement or retirement planning. While 50.2% said the pandemic didn’t affect their retirement, 49.8% said COVID put a dent in their plans or lives as a retiree.
Retirement is often a time to visit new locations. However, retirees had to abandon travel plans for many months while river cruises and tourist attractions shut down and flights were canceled. Most retirees are in a high health risk category during a health emergency, and contracting COVID-19 could be lethal. Some still traveled by car, but not nearly as much as planned. Many chose to stay home even after flights became available while they waited for a vaccine.
Life as we know it screeched to a stop during the initial COVID lockdown, so it’s no surprise that readers told us they put a halt on everything due to COVID-19. Everyone had to stay home as much as possible, but some also had to put off projects like home renovations for many months.
COVID-19 impacts retirement and mental health
The American Medical Association reports people are experiencing a condition called “COVID-19 fatigue.” This is a mental condition causing patients to feel physically burned out after so many months of the “new normal,” although this would also be a symptom of depression.
Many of those who answered our survey were likely experiencing some degree of COVID-19 fatigue, depression or anxiety. Our survey asked no direct questions about mental and emotional health during the coronavirus pandemic, but the stories volunteered give us a window into how people were feeling.
Respondents said they had difficulty being stuck at home with no contact with others. Some ruminated on concerns about their health and their odds of surviving COVID-19. Readers described their feelings using terms like “inner turbulence,” “life uncertainty” and “health worries.” Many were stressed about a drop in income during the pandemic. One respondent felt so detached from society that he compared his life to living like a hermit.
Post-COVID retirement plans: 47.4% Will change or reevaluate their retirement plans
Has COVID-19 caused you to change or reevaluate your retirement plans?
A portion of our survey respondents were not yet retired, and many retirees continue to work part time. Some were finishing their final years of employment when the COVID crisis hit the country and shut businesses down.
Just under 48% of survey respondents needed to reevaluate or change their retirement plans due to COVID. Many readers were unemployed for several months during the pandemic and decided to work longer than originally intended to build retirement funds. Some indicated they didn’t know when — or if — they could retire.
Although states provided additional money to the unemployed through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, finances were tight while many of those surveyed waited for their employers to reopen their businesses.
One respondent was furloughed in March and returned to work in September with a 30% pay reduction. Although the employer said they would be paid the amount lost in the new fiscal year, their savings were depleted. A 401(k) plan withdrawal helped them survive financially, but they could owe taxes and a penalty if this wasn’t a hardship withdrawal.
Forced to retire early due to COVID-19?
For many respondents, the pandemic whas a primary factor in deciding to take the plunge into early retirement. This was the best option for many when faced with a job loss or significant job changes due to the nationwide shutdown and slow economy that followed.
Some were reassigned to jobs they did not enjoy late in their career, and some retired to avoid exposure to clients and customers for fear of contracting COVID-19. At least one reader said they were forced out of a job due to the pandemic and had no choice but to retire early.
A few self-employed contractors lost enough work that they chose to close up shop and retire early. A 67-year old who planned to work until age 70, told us that one of their contracts was canceled due to clients forced out of business. Many respondents expressed a similar sentiment, stating that job changes or the loss of clients was too significant to recover.
An upside to forced retirement resulting from the pandemic
Some found a silver lining when retiring earlier than planned. One said COVID forced them to learn to spend retirement fund dollars more frugally when they discovered they would be happy with less travel, dining out and entertainment. The reader noted it was a rather bizarre twist of fate that COVID-19 taught them greater discipline when adjusting to living on retirement income.
Other readers said the pandemic helped them prioritize what really matters in retirement, driving the decision to move closer to family. Some relocated to states with more affordable living due to price increases spurred by COVID-19 lockdowns.
Now vs. before the pandemic: 15% No longer feel prepared for retirement
We asked our readers how prepared for retirement they felt they were before the pandemic compared with the day of the survey. The number of respondents who said they were “not prepared at all” or “not prepared” increased by 8.25% amid the pandemic.
The biggest hit to retirement readiness struck those who were prepared before the pandemic. More than 11% of respondents who felt prepared for retirement no longer feel confident in their retirement readiness.