Reactions to COVID-19 and the impact on consumer confidence is prompting many consumers to reassess their retirement and financial plans.
A majority of today’s workers and retirees range from feeling cautious to pessimistic about the economic outlook for 2021, according to the Principal Financial Group’s latest Retirement Security Survey, which explores consumer attitudes surrounding saving for retirement, Market volatility and COVID-19. Nearly 75% of workers anticipate the pandemic is affecting their path to retirement and the same percent of retirees anticipate an impact on their accumulated retirement savings.
When asked whether they believe they have enough money saved to live comfortably in retirement years, 57% of respondents overall said they are either “very or somewhat confident,” but that number drops to 44% among workers, which is down 10 percentage points from the previous quarter.
As such, both workers and retirees plan to make changes to help improve their financial health, such as:
- spending less (35%);
- saving more (29%);
- paying down debt (25%); and
- planning to look at financial accounts more frequently (24%).
When asked which account they plan to save additional money, workers favored standard savings accounts and employer-sponsored plans:
- standard savings account (57%)
- employer-sponsored retirement plan (54%)
- standard checking account (31%)
- traditional IRA (23%)
- Roth IRA (20%)
Consumers say health and financial security are their two top priorities this year. They also cite a need for advice as they navigate their financial plans. And despite citing uncertain feelings about what 2021 may bring, 71% of workers and 87% of retirees said they’re confident they’ll remain in a positive state of mind for the next few months.
Principal found that the percentage of respondents who work with financial professionals jumped several percentage points compared to pre-pandemic survey findings—from 37% (Q1) to 40% (Q4) for workers, and from 45% (Q1) to 57% (Q4) for retirees.
Based on the survey results, the firm identifies several areas in which financial professionals and those in the retirement industry may be able to offer support to help individuals feel more prepared for retirement:
- Help improve their retirement picture. More than 60% of workers do not feel prepared to imagine their life in retirement, and more than half say they do not know how they will spend their time once they retire.
- Support development of a retirement savings plan. Nearly 50% of workers surveyed do not feel prepared to plan their retirement income or to make the most of their retirement. Further, only 14% of them feel very confident they will have enough money saved to live comfortably.
- Meet consumers where they are on their financial journey. Retirees and workers alike cite two common areas in which they need financial advice: investment selection (29% of workers and 30% of retirees) and how to manage retirement savings once they have retired (41% of workers and 30% of retirees). Retirees also say the topics of Medicare and Medicaid plans are a top financial advice need (30%), while workers cite needing help determining when to start receiving Social Security benefits (31%).
- Increase education about guaranteed income. Retirees using guaranteed or anticipated income sources during the COVID-19 pandemic say it has enabled them to feel their basic expenses are covered (89%) and be less concerned during bouts of Market volatility (56%). While many retirees are benefiting from guaranteed lifetime income sources, Principal emphasizes that there continues to be a need to increase education and access to these solutions to help more Americans feel more secure about retirement.
Principal’s latest “pulse” survey was conducted in November 2020 among nearly 1,200 U.S. residents (35% retirees and 65% workers) who have at least one financial product or service with the firm.