One in five U.S. workers indicate their confidence in their ability to retire comfortably has declined in light of the coronavirus pandemic — and just 27% are confident they can look forward to a lifestyle free of financial worry, according to findings released Friday by the Los Angeles-based Transamerica Center for Retirement Studies.
The October study, Retirement Security: A Compendium of Findings About U.S. Workers, gauges the impact of the pandemic on workers’ employment and finances. It finds that 52% of workers have experienced one or more negative impacts to their employment including job loss, furloughs, reduced hours, reduced pay and/or retiring early.
LGBTQ workers are among the most impacted, with 65% of LTBTQ workers saying they have experienced one or more negative impacts to their work, compared with just 50% of non-LGBTQ workers. As a result of the pandemic, 33% of all workers have already planned and/or plan to take a loan and/or withdrawal from their qualified retirement account such as a 401(k), 403(b) or similar plan or IRA.
Also, 59% of LGBTQ workers, 50% of urban, 43% of millennials and 42% of men are among workers more likely to be dipping into their retirement savings. Credit card debt may pose a threat to retirement security for many, especially to Generation X workers. More than a third, 33%, of all workers cite paying off credit card debt as a financial priority, including 45% of Generation Xers. Moreover, if their finances have been or were to be negatively impacted by the pandemic, 35% of such workers indicate they would rely on credit cards.
“Before the pandemic, the retirement prospects for many workers was iffy at best,” said Catherine Collinson, CEO and president of the Transamerica Institute and the TCRS. “The pandemic has exacerbated that situation. Millions of workers have experienced negative impacts to their employment, ranging from pay cuts and furloughs to job loss. Some workers have even dipped into their retirement accounts to make ends meet.
“It will take years for many workers to financially recover — and some may never recover. Help from policymakers is needed to strengthen the U.S. retirement system,” she said.
According to Collinson, policymakers can pave the way for improving retirement security by “enacting legislation and implementing reforms that can ensure the sustainability of government benefit programs, encourage employers to offer benefits to their employees, and help prepare workers for long, healthy and productive lives.”
Asked what the new president and Congress should prioritize, nearly half of respondents’ most often cited responses involve strengthening safety nets and improving health care, including addressing Social Security’s funding shortfalls, making out-of-pocket healthcare expenses and prescription drugs more affordable, addressing Medicare’s funding shortfalls, while just 37% of workers cite innovating solutions to make long-term care services and supports more affordable.
Further priorities cited by workers include expanding access to employer-sponsored retirement plans, IRAs and other savings programs, implementing financial literacy curriculum in schools, increasing access to affordable housing, expanding the Saver’s Credit, creating incentives for individuals to obtain ongoing training and education, and allowing employers to match employees’ student loan payments as a contribution in their retirement accounts.
“Workers share many retirement-related risks; however, by increasing an understanding of the differences across demographic segments, we can identify solutions to help those in greatest need,” Collinson said.
Last, the survey points to steps workers can take to improve their planning and safeguard their situation.
Just 27% of workers have a written financial strategy for retirement. Those more likely to have a written strategy include LGBTQ employees at 41%, college graduates at 40% and urban at 36%.
Legal documentation is lacking. Amid the pandemic, it has become even more important to have financial and medical-related legal documents in place. Just 22% of workers have a medical power of attorney or proxy, and college graduates are more likely than non-college graduates to have one. Similarly, 27% of college graduates have a financial power of attorney compared with just 17% of non-college graduates.
“From a societal level to individual households, the pandemic has disrupted nearly every aspect of our lives and laid bare weaknesses in our retirement system,” Collinson said. “As we navigate the pandemic with an eye toward the future, policymakers, industry, employers and individuals have a tremendous opportunity to work together and create a stronger, sustainable and inclusive system in which everyone has the ability to live, work and retire with dignity.”
The compendium is based on a survey conducted in October of 1,173 workers who were currently employed, recently unemployed and/or furloughed amid the pandemic. As part of TCRS’ 20th Annual Retirement Survey, it also draws from a broader survey of 5,277 workers conducted in late 2019. It offers demographic analyses and insights about workers by self-identified employment status, urbanicity, sexual orientation, level of education, generation, gender and ethnicity.