The ‘new retirement’: Americans are living ‘more intentionally,’ post-pandemic

Many studies over the past four years have examined the short- and long-term financial impact the pandemic has had on Americans, including on their retirement preparedness. Now, a new study reveals that the pandemic has had an even deeper impact on retirement beyond dollars and cents.

Fidelity Investments’ State of Retirement Planning study found that two-thirds of respondents said the pandemic has changed the way they think about retirement and made them more intentional about pursuing personal passions and dreams. A traditional retirement doesn’t hold the appeal it once did for a large portion of respondents. Across generations, two-thirds of respondents said they hope for a phased retirement, including part-time work, and working for pleasure while in retirement.

“After witnessing a global pandemic and record high inflation, many Americans were forced to re-evaluate everything from where to live, how to budget, and decide what’s most important to them,” said Rita Assaf, VP of retirement products at Fidelity Investments. “Our study finds that these hardships over the last several years have led many Americans to approach their retirement with more opportunity than ever before. The rise of flexible working options has led many to reimagine what it means to retire. With more options on the table — including traveling, relocating to somewhere scenic, or even starting a new business — many see their ‘golden years’ as an opportunity to pursue their passion through work.”

Nearly all respondents (85%) want to retire while they are still healthy enough to be active, targeting an average retirement age of 61-62. Motivating factors for determining when to retire vary by generation though. Gen Z and millennials cite becoming debt-free or reaching career goals as top factors while boomers say they’ll retire when they feel emotionally ready. One in 10 Gen X respondents have not yet determined when they plan to retire, although they are continuing to save at 15% of their income, the report found. Encouragingly, younger generations are saving an even higher percentage of their income for retirement, with millennials saving 20% and Gen Z saving 25%.

These new intentional aspirations will impact Social Security, Medicare and taxes, said Assaf. For example, Medicare coverage may not be available to those who move abroad, so it would be important in that case to factor alternative health care options into retirement planning, said Assaf.

Related: SECURE 2.0: New ways to boost 401(k)s and support employees’ unique needs

“If you’re considering starting a new business, it could increase your tax liability and potentially reduce your Social Security benefits if you bring home more than the annual earnings limit,” she said. “At the end of the day, everyone’s situation will be unique, which is why it’s important to start retirement planning and seek guidance from a financial advisor.”

Despite challenging economic conditions in the wake of the pandemic, three-quarters of respondents still feel confident about retiring when and how they want to, the report found. That confidence was underpinned by promising fourth-quarter data that showed retirement account balances were the highest they’ve been in two years.

However, not everyone is feeling confident about retirement. Women and older Americans are less confident than men and younger Americans about their retirement preparedness, according to Fidelity. In addition, more than half of Gen Z and millennial respondents said they think they’ll have a harder time saving for retirement due to a higher cost of living.

Respondents acknowledged several challenges to saving for retirement, including inflation, debt and building emergency savings. Younger respondents also pointed to student debt, saving for a home and wedding, and childcare costs as barriers to saving for retirement. All generations indicated they wish they had started planning for retirement earlier, including Gen Z who started planning at an average age of 20 but wish they had started at 17. At the other end of the spectrum, boomers on average said they started saving at 43 but wish they had started at age 32.

Retirement savers were optimistic about recent legislative changes designed to make saving easier, such as SECURE 2.0. In particular, the provision that allows employers to help their workforce save for retirement while paying down debt and building up emergency savings were particularly well received.

“Beyond sponsoring workplace retirement plans and offering a company match, employers can help improve their employees’ retirement prospects by offering holistic benefits packages that address their overall financial wellness,” said Assaf. “Things like emergency savings programs or student loan assistance to help alleviate workers’ overall financial burden can free up income that can instead be allocated to retirement savings.”