Wells Fargo issued the following announcement on Oct. 23.
COVID-19 has raised fresh concerns about Americans’ retirement preparations, with some saying the pandemic has permanently impacted their ability to save for retirement, according to the 2020 Wells Fargo Retirement study conducted by The Harris Poll in August, which examines the attitudes and savings of working adults and retirees.
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Particularly for workers whose employment has been negatively impacted by COVID-19,1 retirement has become an even more challenging goal over the last eight months, with many expressing pessimism about their life in retirement – or worried if they can retire at all. Fifty-eight percent of workers impacted by the pandemic say they now don’t know if they have enough saved to retire because of COVID-19, compared to 37% of all workers. Moreover, among workers impacted by COVID-19, 70% say they are worried about how to make sure they don’t run out of money in retirement, 61% say they are much more afraid of life in retirement, and 61% say the pandemic took the joy out of looking forward to retirement.
Retirement savings provides a more striking contrast, showing that COVID-19 has driven some workers even further behind: Working men report median retirement savings of $120,000, which compares to $60,000 for working women, according to the study. Yet for those impacted by COVID-19, men report median retirement savings of $60,000, which compares to $21,000 for women.
“With individual investors now largely responsible for saving and funding their own retirement, disruptive events and economic downturns can have an outsized impact on their outlook,” said Nate Miles, head of Retirement for Wells Fargo Asset Management. “Our study shows that even for the most disciplined savers, working Americans are not saving enough for retirement. The good news is that for many of today’s workers, there is still time to save and prepare.”
Women and Younger Generations
The study found that women and younger generations are also falling behind. Women are less sure if they will be able to save enough for retirement, and appear to be in a more precarious financial situation than men. Barely half of working women (51%) say they are saving enough for retirement, or that they are confident they will have enough savings to live comfortably in retirement (51%). Women impacted by COVID-19 have saved less than half for retirement than men and are much more pessimistic about their financial lives. In addition, women impacted by COVID-19 are less likely to have access to an employer-sponsored retirement savings plan (59%), and are less likely to participate (77%).
Similarly, though Generation Z workers started saving at an earlier age and are participating in employer-based savings programs at a greater rate than other generations, they are nonetheless worried about their future. Fifty-two percent of Generation Z workers say they don’t know if they’ll be able to save enough to retire because of COVID-19, 50% say they are much more afraid of life in retirement due to COVID-19, and 52% say the pandemic took the joy out of looking forward to retirement.
Glass Half Full
At the same time, the study showed that despite a challenging environment, many American workers and retirees remain optimistic about their current life, their finances, and their future. A majority of workers say they are very or somewhat satisfied with their current life (79%), in control of their financial life (79%), are able to pay for monthly expenses (95%), and feel confident they are able to manage their finances (86%).
Sixty-nine percent of workers and 73% of retirees feel in control and/or happy about their financial situation. In addition, 92% of workers and 91% of retirees say they can positively affect their financial situation, and 90% of workers and 88% of retirees say they can positively affect how their debt situation progresses. And 83% of workers say they could pay for a financial emergency of $1,000 without having to borrow money from friends or family. Yet Americans acknowledge they could improve their financial planning. Slightly more than half — 54% of workers and 50% of retirees — say they have a detailed financial plan, and just 27% of workers and 29% of retirees have a financial advisor.
“The study found incredible optimism and resiliency among American workers and retirees, which is remarkable in the current environment,” said Kim Ta, head of Client Service and Advice for Wells Fargo Advisors. “As an industry, we must help more investors make a plan for their future so that optimism becomes a reality in retirement.”
Pandemic Underscores Importance of Social Security and Medicare
Despite an increasing shift to a self-funded retirement, nearly all workers and retirees say that Social Security and Medicare play or will play a significant role in their retirement — a reality underscored by the pandemic. According to the study, 71% of workers, 81% of those negatively impacted by COVID-19, and 85% of retirees say that COVID-19 reinforced how important Social Security and Medicare will be or are for their retirement.
Overall, workers expect that Social Security will make up approximately one-third of their monthly budget (30% median) in retirement. And even among wealthyworkers, Social Security and Medicare factor significantly into their golden year plans — high-net-worth workers2 expect Social Security to cover 20% (median) of their monthly expenses. The dependence by many on the programs also drives anxiety: The vast majority of the study’s respondents harbor concerns that the programs will not be available when they need them and worry that the government won’t protect them. According to the study:
90% of workers would feel betrayed if the money they paid into Social Security is lost and not available when they retire.
76% of workers are concerned Social Security will be raided to pay down government debt.
72% of workers are afraid that Social Security won’t be available when they retire.
67% of workers have no idea what out-of-pocket healthcare costs will be in retirement.
45% of workers are optimistic that Congress will make changes to secure the future of Social Security.
23% of workers are willing to accept less from Social Security to help pay down the national debt.
Vast majorities also want politicians to help with retirement; 76% of workers and 81% of retirees say retirement should be a top priority for the presidential candidates, and 88% of workers and 91% of retirees say Congress needs to make it easier for workers to access tax-friendly retirement plans.
Original source can be found here.
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