Retirement age shifts have been attributed to the global pandemic. Covid-19 has dramatically altered Americans’ retirement plans.
A new study from Northwestern Mutual, found that 35% of American workers have decided to revise their target retirement age. This includes a change in plans to either delay or postpone their retirement age. Almost a quarter (24%) expect to retire later than planned, while 11% plan to retire earlier. The Northwestern Mutual study indicates Gen Zs and Millennials plan to retire prior to age 60 – the former at 59.4 and the latter at 59.5. The average age people expect to retire is 62.6, down from 63.4 in 2020. The pandemic has caused Americans to adjust their retirement age timelines. Interestingly, some are feeling confident enough to retire sooner. At the same time others have decided to delay their exiting the workforce.
Among those planning to delay retirement due to the pandemic there are many reasons. Around 39% said they would push back their retirement date three to five years. More than a third (35%), however, said their anticipated retirement date has shifted back more than 10 years! This decision could have serious ramifications by stifling upward mobility in the graying-of the American workforce.
Here are the top reasons survey respondents gave for delaying retirement:
- Wanting to work and save money given additional flexibility with their workplace – 55%
- Concerns about rising costs like healthcare and/or unexpected medical costs – 50%
- Having to dip into retirement savings – 24%
- Taking care of a relative/friend; responsible for additional dependents – 14%
Among those planning to retire sooner than anticipated, nearly half (18%) said they would move their targeted retirement age up by three to five years. Here are the reasons they gave for doing so:
- Wanting to spend more time with loved ones – 42%
- Focusing on hobbies/priorities outside of work – 33%
- Realizing their personal mission is more important than saving more – 29%
- Work situation has changed (laid off, etc.) – 28%
Although people are saving more, they recognize that they will likely need more money in retirement. On average, respondents to the Northwestern Mutual survey had $98,800 saved for retirement – up from $87,500 last year. However, they also said they expected to need more than $1 million to retire comfortably, compared to $950,800 in 2020. And although overall retirement savings are up, 43% believe they may outlive their savings, up from 41% last year. Respondents are taking proactive steps to address this concern, including:
- Increasing savings – 29%
- Putting together a financial plan – 22%
- Discussing options with their family – 18%
- Purchasing investments – 18%
- Seeking advice from a financial advisor – 18%
When it comes to retirement income, more than a quarter of people (26.5%) expect their 401(k) to be their primary source, tied with Social Security (26.5%). Personal investments or savings were a close second (23.8%). Nonetheless, 19% of those surveyed said it’s not likely that Social Security will be available to them, and 43% said they could imagine a time when Social Security no longer exists.
Plan sponsors should continue to encourage workers to start saving for retirement as early as possible. Plan sponsors should be active in educating participants on the actions they can take to improve their savings and chances of retirement success. In addition, plan sponsors should remind employees to consider their priorities when thinking about a targeted retirement age. This should include when to retire, how to retire, and where to retire. The overall goal is to encourage eligible employees to take action now. That is the best way to make sure they have enough money set aside to achieve their goals.