COVID-19 and Retirement

In 2020 so far, the things we used to do in crowded company are on hold. Concerts. School. Office work. This year if it involves people in proximity to each other and occurs indoors, it has quite likely been paused indefinitely.

But just as remote work for most marches on, the golden horizon of retirement seems to many a concerned goal. According to SimplyWise, an online retirement services blog, 62% of Americans are more concerned about retirement than a year ago, up from 56% in May. More than 70% of people in their 50s express greater worry. 

And there are plenty of worrying statistics that explain why. In April this year the national unemployment rate was 15.4% for workers 65 and older. Of the more than 1,200 people surveyed by SimplyWise, one in three said they saved nothing for retirement last year. Of those surveyed who lost their jobs due to COVID-19, 55% said they saved less than $500. Of those making less than $50,000, 65% saved less than $500. For middle- and lower-income workers, a stable retirement fund seems far, far away.

Retirement Options

Saving for retirement is a key building block for successful financial management and requires sharp attention throughout a working career. Social Security, is intended to supplement, and not replace, other retirement income, and the average monthly Social Security benefit is $1,503. In a month, the average American spends $5,102.

Employer-sponsored 401(k) pensions are a  retirement tool that takes a percentage of pre-tax earnings from worker paychecks and often matches it with workplace contributions, then invests the total sum in the stock market. While subject to many restrictions and penalties for early withdrawal, 401(k) funds that see a return on investment over many years are nevertheless exempt from paying a capital gains tax on stock market earnings when properly withdrawn.

As of 2019, according to data from BrightScope, a financial planning data company for asset managers, more than $6.4 trillion had been invested in 401(k) plans across America, a jump of $3.7 trillion since 2009. 

In the survey by SimplyWise, 24% of those who have a 401(k) said they were considering withdrawing right now. For those laid off due to the coronavirus, 41% were considering withdrawals. And 23% of Americans in their 50s were fully prepared to tap into their 401(k) for immediate emergency cash, up from the 14% who said they would in May.

SimplyWise lists the following statistics to describe how COVID-19 has changed the national outlook on many prospective retirements:

• Half of Americans believe they will outlive their retirement savings.  
• 72% now plan to work in retirement, up from 67% in May.
• 1 in 5 could not last more than 2 weeks off their savings.
• One in five Americans in their 60s have lost jobs or been furloughed due to COVID-19.

As if that wasn’t worrisome enough, the Centers for Disease Control and Prevention states that adults over 65 are at a higher risk of severe illness from COVID-19.

What to do?

It is never too early to prepare for retirement, and though it may seem like a giant hill to climb, there are plenty of things even late-starters can do to sharpen their pension knowledge. 

Empeople has a program that provides easy-to-follow financial planning lessons for our credit union members at every stage of their career. Whether you’re still buzzing with youthful energy in your first real job or enjoying some rest and relaxation at the end of a long and fruitful career, the first step is Empeople’s Financial Education Center.

With clear, concise and coherent online video tutorials, Empeople can pace you through the many phases of retirement planning, from the basic to the complex. No matter what you have done up until now, the Financial Education Center has everything you need to know to plan for your pension, including lessons on:

• 401(k) Plans
• Maximizing Retirement Savings
• Estate Planning
• FIRE Lifestyle
• Individual Retirement Accounts (IRAs)
• Planning for Retirement
• Wealth Transfer
• When to Collect Social Security

It is easy to sit back and be overwhelmed by numbers, but with Empeople’s retirement tutorials it’s even easier to lean forward and make the numbers work for you.