Employees are more confident in their retirement savings than expected
The financial disruption caused by COVID hasn’t hindered employees’ vision of what their lifestyle will look like in retirement.
Seventy-two percent of workers feel confident in their ability to retire comfortably, up 3% since March, 2020, according to the 2021 Retirement Confidence Survey by the Employee Benefit Research Institute. Eighty percent of current retirees feel they have enough money to live on in retirement.
While the pandemic has caused financial insecurity for many, employees have been able to keep up with their savings: 30% of employees say they’ve made changes to their retirement plans and of those, 60% increased their plan contributions, according to ERBI. Just 25% stopped or reduced their contributions.
“Even with changes in the labor market, workers’ confidence in their ability to live comfortably in retirement remains high overall,” Craig Copeland, senior research associate at EBRI, said in a release. “Showing further resilience, just one-in-ten workers say they have taken a loan, hardship distribution or early withdrawal from their workplace retirement plan in the past 12 months.”
Not all workers have fared so positively during the pandemic: 39% of workers say they experienced a negative job or income change during the pandemic, like job loss or a reduction in pay, ERBI found. Half of employees who experienced a negative change felt less confident in their retirement outlook.
“While resilience may be the word for 2021, three-in-ten workers say the pandemic has negatively impacted their ability to save for retirement, due to reduced hours, income or job changes,” Copeland says. “The groups most impacted were those who were more likely to have low confidence historically, such as low income and those with debt.”
Financial stress has been a burden for many older employees during the pandemic. Forty-six percent of baby boomers reported higher levels of financial stress than before the pandemic, according to PwC data. However, employers support this population through financial wellness programs and more options for long-term savings.
Employees understand the importance of continuous income during retirement and 75% of employees would like a guaranteed monthly income option included in their workplace savings plan, ERBI found.
Overall, the vision people have of life in retirement has changed, according to ERBI. Three-quarters of employees plan to work part time in retirement. However, once employees reach retirement age, just 30% report actually working during this time. Three-in-ten retirees say their life in retirement is better than expected.
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