Staying optimistic: Despite COVID, older Americans' retirement expectations right on target

There were plenty of reasons for people to become discouraged during COVID-19, but a new study by the Employee Benefits Research Institute found that older Americans remained optimistic about retirement despite the pandemic’s disruptions to work and finances.

The report is based on the 2020 Health and Retirement Study conducted by the Institute for Social Research at the University of Michigan. The survey of 37,000 people aged 50 and older found that 60% of respondents said their work was impacted by the pandemic. That includes 55% who had to stop working entirely, 15% who lost their job permanently, and 20% whose work became more risky due to the pandemic. Further, about 20% of workers indicated they had to change their hours or days of work and 12% said they switched to remote work.

However, these disruptions did not seem to have a significant impact on finances, EBRI found. Government subsidies, policy changes, reduced spending from lockdowns, work-from-home opportunities and other creative solutions may have helped older workers weather the COVID storm, the report said.

More than three-quarters of respondents said their financial situation stayed the same and 60% indicated that their household spending did not change in 2020. Furthermore, elderly Americans surveyed did not alter their retirement expectations significantly as a result of the pandemic, including planned retirement age and Social Security benefit claiming age, the study found.

Planned vs. expected retirement ages

According to the EBRI report, there has always been a three-year gap between planned and expected retirement ages among older Americans. The study examined whether there was any difference between the planned and expected retirement ages of those impacted by the pandemic vs. those who were not impacted and found no statistical difference between the two groups. Both groups largely plan to retire at about age 66 but expect to actually be able to retire at age 69.

The study found that the pandemic may have had a slight impact on Social Security claiming plans, with those whose work was impacted by COVID-19 expecting a slightly later SSB claiming age of 66.1, up from 65.6. The report also found that the natural trend toward later and later retirements was not impacted by the pandemic.

Overall, the pandemic’s impact on work did not differ substantially by demographic and economic status, the report found. However, male participants were more likely to have their job impacted by COVID-19 than female participants, particularly among those with fewer years of education. Work-from-home transitions were most prevalent among respondents with a higher level of education, who were also less likely to experience total job loss, the report said.

EBRI noted the important role retirement expectations play in making financial planning decisions as well as policy proposals and retirement product and service design.

“Retirement expectations determine retirement intentions, and retirement intentions predict retirement behavior,” the report, authored by Zhikum Liu, senior research associate at EBRI, said. “Individuals who want to maintain their desired standard of living when retired will need to accumulate sufficient financial assets with careful preparation and have a more realistic retirement age projection before actual retirement. A deeper understanding of the significance of retirement age expectations is needed for such preparations.”

EBRI will host a webinar featuring Liu and PGIM’s David Blanchett to discuss the findings of the study at 2 p.m. EDT, Thursday, September 15.

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics.