COVID-19 Impacting Short Term Consumer Confidence, Retirement Planning

Rhea-AI Summary

According to the Principal Retirement Security Survey, nearly 75% of workers and retirees are concerned about their retirement savings due to the pandemic. Workers and retirees plan to improve their financial health by spending less (35%), saving more (29%), and paying down debt (25%). Despite economic uncertainties, 85% reported high happiness levels at the end of 2020. The survey also highlights a surge in individuals seeking financial advice, with significant needs in retirement savings planning and investment selection. Over 60% of workers feel unprepared for retirement, underscoring the need for enhanced financial education.

Positive

• 85% of respondents reported high happiness levels in Q4 2020.
• Surge in consumers seeking financial advice, with workers rising from 37% to 40% and retirees from 45% to 57%.

Negative

• Nearly 75% of workers believe the pandemic is impacting their retirement trajectory.
• Over 60% of workers do not feel prepared for retirement.

A majority of today’s workers and retirees range from feeling cautious to pessimistic about the economic outlook for 2021, with nearly 75% concerned about how the global pandemic may impact their retirement savings, according to the latest Principal^® Retirement Security Survey. The study gauged consumer concerns and actions around saving for retirement, financial plans, and reactions to COVID-19 and the accompanying market and economic impacts.

“COVID-19 and the resulting impacts have changed how many consumers think about their current and long-term financial security,” said Sri Reddy, senior vice president of Retirement and Income Solutions at Principal^®. “Throughout the pandemic, we’ve engaged with our individual and business customers to provide real-time information that can help in managing their finances amid the uncertainty. As we reflect on the past year and look ahead to what 2021 may bring, we’re committed to helping workers and retirees feel more secure about their future by offering actionable insights and possible financial solutions.”

Consumers say health and financial security are their two top priorities this year. They also expressed a need for advice as they navigate their financial plans. And despite citing uncertain feelings about what 2021 may bring, workers and retirees reported high overall happiness during the fourth quarter of 2020 (85%) that’s consistent with 2020 pre-pandemic findings (86%). In addition, 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.

Anticipating impacts from market volatility, consumers plan to improve their financial health

Nearly 75% of workers anticipate the pandemic is impacting their path to retirement, and the same percent of retirees anticipate an impact on their accumulated retirement savings. As a result, 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%)

Looking to 2021, consumers identify what’s most important and where they need help

Poised with caution and maintaining a positive outlook toward the coming months, workers and retirees call attention to what they feel is most important in life, notably:

• health (56%)
• financial security (49%)
• having a close-knit family (35%)

Opportunities to boost retirement confidence and preparedness

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, Principal identified several notable areas in which financial professionals and those in the retirement industry may be able to offer valuable support to help individuals feel more prepared for retirement.

• Help improve the retirement picture. Over 60% of workers do not feel prepared to imagine their life in retirement and more than half say they do not know how they’ll 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. And, only 14% of them feel very confident they’ll 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 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, there continues to be a need to increase education and access to these solutions to help more Americans feel more secure about retirement.

To access the full report, please click here.

About the Principal Retirement Security Survey

Principal conducts periodic “pulse” surveys with customers, financial professionals, and consultants to gain their insights about how timely topics might be impacting them. The November survey findings explore consumer concerns and actions surrounding saving for retirement, financial behaviors related to market volatility, and COVID-19. Nearly 1,200 U.S. residents (35% retirees and 65% workers) who have at least one financial product or service with Principal participated in the study during Novembe

FAQ

What percentage of workers are concerned about retirement savings due to the pandemic?

Nearly 75% of workers are concerned about how the pandemic impacts their retirement savings.

How has the pandemic affected consumer financial behaviors?

Consumers plan to spend less (35%), save more (29%), and pay down debt (25%) to improve financial health.

What are the top priorities for consumers in 2021 according to the survey?

Health (56%) and financial security (49%) are the top priorities for consumers.

What percentage of workers feel unprepared for retirement?

Over 60% of workers do not feel prepared to imagine their life in retirement.

How many retirees need help with Medicare and Social Security?

30% of retirees need advice on Medicare and 31% on Social Security benefits.