Why the COVID-19 Pandemic Will Depress Retirement Saving and Income Outcomes

Abigail Hurwitz is an Assistant Professor in the Robert H. Smith Faculty of Agriculture, Food, and Environment of The Hebrew University of Jerusalem.

Olivia S. Mitchell is the International Foundation of Employee Benefit Plans Professor, as well as Professor of Insurance/Risk Management and Business Economics/Policy; Executive Director of the Pension Research Council; and Director of the Boettner Center on Pensions and Retirement Research at the Wharton School of the University of Pennsylvania.

Orly Sade is the Albertson-Waltuch Chair in Business Administration and an Associate Professor of Finance in the Department of Finance, School of Business Administration, Hebrew University of Jerusalem.

Beyond its widespread and severe health-related issues, the coronavirus pandemic is likely to give rise to numerous longer-run economic challenges. Specifically, COVID-19 altered household finances and wellbeing, despite stimulus payments and extended unemployment benefits. While much research has been devoted to understanding the immediate economic implications, our new study points to potential longer-run outcomes from the pandemic. In particular, as a result of their experiences with the coronavirus, we argue that people may curtail their retirement savings and annuitization decisions.

Our Survey

To illustrate this point, at the outbreak of the pandemic, we built and fielded a nationally diverse online survey asking how Americans perceive how the virus threatened their own survival. We also used experimental vignettes to determine how this influenced peoples’ advice to others regarding how much to save and annuitize. Using the Prolific online platform, we asked about 5,000 people age 35-83 questions about their social and economic attributes, as well as hypothetical questions regarding saving behavior and demand for longevity insurance products. Half of the participants were randomly selected to advise a hypothetical single man (woman) age 60 with no children regarding whether to increase his (her) retirement savings; the other half was asked to provide advice on how to withdraw his (her) retirement savings.

We also queried respondents their perceived chance of getting COVID-19, suffering from financial consequences due to the virus, or dying from it. Our respondents indicated that they thought their average probability of getting the virus was 26%, and 19% believed they would die from it if infected. They also forecasted a 21% chance of running out of money in the next three months, due to the pandemic. When we linked peoples’ perceptions about COVID-19 and their own characteristics, we found, not surprisingly, that vulnerable respondents also believed they were more likely to face financial and health problems due to the pandemic. Those anticipating a greater chance of dying from COVID-19 were older and widowed; by contrast, people least worried that they would die from the virus were married, in good health, and financially literate.

When we asked our respondents how they would advise older persons looking ahead to retirement, the vast majority advised the hypothetical individual to save more. Almost a third advised the vignette person to boost savings, and over half recommended a significant increase in savings. Three-quarters also advised the vignette individual to annuitize a portion of his/her retirement nest egg. However, when we linked these answers to peoples’ expected chances that they would run out of money due to the disease, we found that the more pessimistic were also least likely to advise saving more and annuitizing. Moreover, this result was driven by the virus’ anticipated impacts on peoples’ financial and economic status, rather than dramatically altering their own anticipated longevity.


What we have learned with our study is that Americans who believed they were more financially fragile due to COVID-19 were also far less likely to advise saving more and annuitizing. We attribute this to COVID’s impact on individuals’ economic status, rather than because they believed their own survival probabilities declined severely. This will have potentially important negative implications for future retiree wellbeing.

Relatedly, several nations including Israel, the US, Australia, Chile, and Peru have recently allowed residents to withdraw lump sums from their retirement plans to help finance the COVID-19 relief effort. Nevertheless, such a policy, along with peoples’ pandemic-induced loss of interest in saving and annuitization, will likely undermine retirement security for the already-vulnerable.


Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.