COVID-19 has impacted almost every aspect of people’s lives globally. While the short-term financial implications of the pandemic are top of mind for many individuals, we were interested to see whether this climate would change long-term savings behavior. In this year’s Global Retirement Reality Report (GR3), we investigate the impact that COVID-19 has had on personal finances and sentiment around retirement planning. In this report, we share the results of our survey of defined contribution (DC) participants in the United States.
In comparing retirement sentiment against the 2018 GR3 data set, Americans continue to be the most confident nation surveyed. However, this optimistic outlook does not come at the expense of the current reality. In 2020, though few respondents had experienced a deterioration of income or lifestyle, many expressed anxiety about their “new normal” and cited changes to immediate spending and saving habits. These practical measures are expected to be short-lived, while long-term retirement investing strategies have remained on track, suggesting little variance in participant behavior.
But the participant experience will most likely be drastically altered and both plan sponsors and retirement plan advisors have an opportunity to light the path ahead, from workplace benefit policies to corporate governance actions to new investment solution guidance.
Key Finding #1: 72% of Americans consider their financial situation to be the same or better during the COVID-19 crisis
To qualify for the survey, respondents must have had access to a workplace-sponsored DC retirement savings plan and been working at least part-time. In the US, the ability to meet these criteria suggests a more financially secure survey population, particularly as nearly 40% of working Americans didn’t have access to a DC plan pre-pandemici and, as of June 2020 data, US unemployment was still a historically high 13.3%.ii Survey confidence quotients may be higher than national sentiment, as 53% of respondents reported that their financial situation is the same, with 19% describing it as either “slightly” or “a lot” better.
This sense of stability is echoed in the employment circumstances, with 49% reporting no impact from the pandemic, followed by 21% who reported a reduction in hours and 10% who reported a reduction in pay. Few had been furloughed (5%) or laid off (3%).
Key Finding #2: The US leads in retirement confidence
American optimism is a studied phenomenon. Alexis de Tocqueville, a 19th-century French observer of American life, remarked that the national outlook had “a lively faith in the perfectibility of man … [seeing] society as a body in a state of improvement.”iii Belief that the present is bound for a greater future and individuals can participate in that betterment is a uniquely sanguine — and American — view.
Americans are 37% more confident that they will be able to retire when planned than respondents from all other countries surveyed.*
*In 2020, Americans reported a net 25% confidence (defined by 295 participants who said they were “somewhat optimistic,” 164 who were “very optimistic” and 98 who were “extremely optimistic”) versus the ex-US average of 18%.
Even in today’s chaotic climate, US respondents reflected higher levels of optimism and confidence than aggregate global respondents, though in comparison to 2018 data, the American sentiment has downshifted, reflecting a slight decrease in hopefulness and an incremental increase in doubt.