Post-pandemic plan participant picture not as poor as you'd suppose

While the pandemic has not fully left us and waves of sub-variants continue to affect everyday life, a picture has formed about how workers have weathered the COVID-19 pandemic. A new retirement report from Transamerica, Emerging from the COVID-19 Pandemic: The Retirement Outlook of the Workforce, finds that 36% of the workforce was unemployed for different reasons during the pandemic. Also, 28% of workers experienced one or more employment-related negative financial impacts ranging from reductions in hours and salary to layoffs and furloughs.

The good news is that many workers have not lost sight of their future retirement.

Almost two in three employed workers (63%) indicate their financial situation has stayed the same amid the pandemic while 22% say it worsened. Thirty-eight percent experienced negative employment impacts during the pandemic including reduced hours (20%), reduced salary (13%), being laid off (12%), and being furloughed (12%). Twenty- eight percent were unemployed at some point during the pandemic.

People are still saving, notes the report. Seventy-nine percent of employed workers are saving through an employer-sponsored retirement plan and/or outside the workplace and they began saving at age 27 (median).

Among those who are participating in a 401(k) or similar plan offered by their employer, an impressive 38% are contributing more than 15% of their annual pay. However, 39% of employed workers have dipped into their retirement accounts, including 29% who have taken a loan and 27% who have taken an early and/or hardship withdrawal.

Just three in 10 “strongly agree” they are building a large enough retirement nest egg (30%). Despite having access to many resources offered through their employer’s retirement plan providers, only 32% have a financial strategy for retirement in the form of a written plan.

Self-employed workers are saving as well. Sixty-eight percent of self-employed workers are saving for retirement, and they started saving at age 29 (median). However, many are not saving consistently. Thirty-four percent only save for retirement from time-to-time and 20% say they never save for retirement.

Among those who are currently saving, 79% are saving in one or more types of tax-advantaged retirement account, with a traditional or Roth IRA being the most common (44%).

Looking to the future, 69 percent of workers are confident that they will be able to fully retire with a comfortable lifestyle, including 24% who are “very” confident and 45% who are “somewhat” confident.

Employed and self- employed workers (72%, 69%, respectively) are significantly more likely to be confident than unemployed workers (49%). Employed and self-employed workers are also more likely than unemployed workers to be “very” confident (25%, 28%, 14%, respectively).

The pandemic effect

One in four workers (25%) indicate their financial situation has worsened in light of the pandemic; however, the survey findings vary dramatically by employment status.

Forty-nine percent of the unemployed and 34% of the self-employed indicate their situation worsened, compared with only 22% of employed workers. In contrast, employed and self-employed are more likely to indicate their financial situation has improved (16%, 15%, respectively), compared with the unemployed (7%).

Six in 10 workers (60%) experienced one or more employment impacts resulting from the pandemic, including 38% who cited negative impacts. The most often cited impacts include shifting to remote work (21%), reduced work hours (20%), increased work hours (17%), reduced salaries (13%), layoffs (13%), and furloughs (11%).

On a positive note, approximately eight in 10 workers say they have close relationships with family and friends, are generally happy, are enjoying life, and have a strong sense of purpose. However, employed and self-employed workers are faring much better than the unemployed.

Going forward, the report suggests recommendations for employers in supporting long-term health and financial well-being of employees. These include: communicating changes to the workforce, flexible work arrangements, health and welfare benefits, offering a retirement plan, extending benefits to part-time workers, promoting benefits, fostering an age-friendly work environment, encouraging lifelong learning opportunities, offering pre-retirees greater levels of assistance, and finally, creating opportunities for workers to phase into retirement.