Despite the economic shock of the coronavirus pandemic, American workers and retirees remain largely optimistic about their financial prospects for retirement.

In its annual Retirement Confidence Survey conducted in January 2021, the Employee Benefit Research Institute (EBRI) found that 80 percent of retirees and 72 percent of workers were either very or somewhat confident in their ability to afford a comfortable retirement.

Pandemic effects

“Even with changes in the labor market, workers’ confidence in their ability to live comfortably in retirement remains high overall,” said Craig Copeland, EBRI senior research associate and the study’s co-author.

On the other hand, he continued, “Three in 10 workers say the pandemic has negatively impacted their ability to save for retirement due to reduced hours, income, or job changes.” Workers who said their ability to save was negatively affected were those who have historically reported lower confidence, including individuals with low income and debt-management challenges.

Nearly four in 10 workers said their households experienced a negative job or income change since Feb. 1, 2020. One in 10 were furloughed or temporarily laid off, while 18% said their hours and/or pay were reduced. Half of workers who reported a negative change said they were either somewhat or significantly less confident in their ability to retire comfortably because of the pandemic.

By contrast, 21 percent of workers reported having some type of positive change during the pandemic, and just 17 percent now plan to retire later than anticipated because of the crisis.

Retirees seemed even more resilient. Eight in 10 said their overall lifestyle is what they expected or better than they anticipated — results that remained virtually unchanged from the January 2020 survey. Just 26 percent of retirees said their expenses are higher than expected, a decrease from the 2020 results. About 70 percent said their retirement confidence was not affected by the pandemic. Study co-author Lisa Greenwald speculated that some of this confidence may be because retirees spent less overall during 2020, a year with limited opportunities to travel and enjoy other leisure activities.

The survey also revealed stronger confidence in Social Security and Medicare, perhaps because benefits continued uninterrupted throughout the challenging year. Both retirees and workers reported the highest-ever confidence levels in the ability of Social Security to continue providing benefits at least equal to what is received today. And despite critical healthcare concerns during 2020, 75 percent of retirees and nearly 60 percent of workers were confident in the future of Medicare — another record high.

Other findings

The Retirement Confidence Survey consistently finds that workers expect to leave the workforce at a later age than that of actual retirees. In 2021, 64 percent of workers said they expect to retire at age 65 or older; however, 71 percent of retirees actually left work before age 65. Similarly, 72 percent of workers said they expect to earn a paycheck during their retirement years, while just 30 percent of retirees said they have worked for pay in retirement.

Half of workers said they and/or their spouse have tried to calculate how much they will need to save to live comfortably in retirement. Workers who participate in a retirement plan are far more likely to have performed this calculation than those who do not.

One-third of workers said they currently work with a financial professional. Of those who didn’t, 38 percent expect to do so in the future. There is no assurance that working with a financial professional will improve investment results.

Following are other sources of information workers use for retirement planning:

• Family and friends: 35 percent
• Online resources and independent research: 35 percent
• Their employer or information received at work: 22 percent
• Online advice or advisors who provide guidance based on formulas: 17 percent
• Representatives from their workplace retirement plan provider: 16 percent

For more information, visit www.ebri.org.

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Kim Brumbaugh is the founder and CEO of Brumbaugh Wealth Management, an Exton-based firm that helps secure people’s financial futures by understanding their unique position and providing personalized solutions for their needs. She started her firm in 2004 with a clear vision to coach clients through complex financial situations and act as a catalyst to get things done. Click here to learn more about Brumbaugh Wealth Management.

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Kim Brumbaugh is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Brumbaugh Wealth Management is not an affiliate with Lincoln Financial Advisors Corp. CRN- 3599507-051921