Anna Rappaport, FSA, MAAA is a member of the Pension Research Council Advisory Board, and the chairperson of the Society of Actuaries Committee on Post-Retirement Needs and Risks.
In the last two years, COVID-19 has changed the lives of most Americans. One million Americans have died, and the pandemic sickened many, disrupted jobs, and produce financial market shocks. The US now faces labor shortages, high inflation, ongoing COVID-19 cases, and a great deal of uncertainty about what comes next. The new issues add to retirement system challenges that have existed for a long time. We still do not know how retirement may change in the future, but the environment points to change.
Now that we are two years into the pandemic, we understand more about individual experiences and issues and some impacts on person perceptions have been identified. The Society of Actuaries Research Institute (SOA) has a new survey entitled Financial Perspectives on Aging and Retirement Across the Generations designed to be representative of the total population, as well as a new analysis based on the 2021 Post-Retirement Risks and the Process of Retirement survey. Details of both survey results are in separate reports. Both reports and a variety of other COVID related research is now available in a new report COVID-19 Aging and Retirement Research: What’s Been Done and What’s to Come?
Key findings about the impact of COVID-19 on retirement and finances included:
- About 1/3 of respondents expected to change when and/or how they were going to retire. Older generations were more confident in their financial security, including two-thirds of Early Boomers who felt they were on track for a financially secure retirement. Yet younger generations were less sanguine: for instance, 65% of Millennials were negatively impacted, with many of them shifting their focus to short-term financial goals (and 64% said they now plan financially for less than one year into the future).
- This unevenness also extended to employment. Around 40% of Millennials, 33% of Gen Xers, and 21% of Early Boomers experienced some sort of job loss or pay cut.
- Social isolation has also been a problem for many people, with increases in depression and mental health problems.
Business practices are also changing, including more rapid adoption of technology and much job restructuring. It seems clear that there will be more remote work in the future than pre-pandemic, but it is unclear what other workplace changes will take place and how compensation and benefits will be adjusted to fit the emerging reality. It also is likely that retirement programs may be restructured, though there remain more unanswered questions than answers.
Some key questions about the future of work and retirement include:
- What will be the impact of long COVID-19 on health, work, disability, and retirement?
- Will retirement ages rise, and will part-time work become more available?
- How will the roles of government and employer retirement systems change? Will retirement risk sharing plans emerge, other than traditional defined benefit and defined contribution plans?
- What can be done about individuals not covered by retirement and health plans other than Social Security and Medicare?
As our population continues to age, retirement security remains an increasingly vital driver of many Americans’ financial concerns.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.