Retirees Maintain Savings and Investment Plans in Short Term, Cautious About 2021 Economic Outlook

·5 min read

New study from Principal® reveals retirees’ top concerns, including a spike in COVID-19 cases this Fall

Today’s retirees are staying the course with their savings and investing decisions—despite the economic uncertainty brought on by the escalation of the COVID-19 pandemic and upcoming U.S. election—according to a recent survey by Principal Financial Group®. Findings from the quarterly Principal® Retirement Security Survey (3rd Quarter 2020) indicate that while most retirees feel they can live comfortably financially in the near future, that confidence wanes when they think longer term. More than 60% report feeling cautious regarding the economic outlook for next year.

During August and September, Principal surveyed more than 630 retirees and workers across the U.S. to get a pulse of consumer concerns and actions surrounding saving for retirement, their financial behaviors related to market volatility, COVID-19, and the upcoming election.

"This survey provides useful insights about the issues that are important to retirees and near-retirees in the current environment," said Sri Reddy, senior vice president of Retirement and Income Solutions at Principal. "Their perspectives and sentiments are important to understand so we can help identify further actions that could help promote their financial security today and into the future."

According to the research, the percentage of retirees who report they are happier in retirement decreased from first quarter Principal research conducted before the pandemic (from 51% to 41%). Retirees share that they struggle with imagining their life in retirement and are unsure how they’ll spend their time—citing not being able to travel (61%) or see family (58%) and planning for health care and long-term care costs (44%).

Retirees react to COVID-19 and election season

Nearly 50% of retirees say they are not changing investments and saving strategies due to any election related outcomes. They hold that the election may have a short-term effect on the market; however, the majority understand retirement and investing is long term. In fact, more than 20% of retirees said their accounts would have to decline by over $25,000 before they would consider changing their investment strategy.

When it comes to COVID-19, retirees shared their immediate concerns.

  • Nearly 60% are concerned about children, teachers, and school administrators staying safe during the school year.

  • Nearly half say they are worried about long-term financial implications for themselves, their family, their community, and the U.S. economy.

  • 45% are concerned about small businesses in their community staying open.

  • Nearly 40% worry the U.S. will enter a deep recession for a protracted length of time.

  • Nearly 40% are concerned COVID-19 will spike in the fall and potentially be contracted by themselves or family members.

Retirees are responding to COVID-19 with financial health and wellness measures in mind.

  • 77% report reducing monthly expenses.

  • 58% report simplifying their life in retirement by consolidating financial portfolios, relationships with wealth management firms, or/and relationships with financial professionals.

  • 33% report looking at finances more frequently.

  • 18% are meeting with financial professionals.

  • 17% are paying down debt.

  • 14% are planning to save more money.

  • 13% are creating or adding to an emergency savings account.

Nearly 50% of retirees surveyed who have a deferred annuity reported it was a primary reason they have more confidence in retirement and reduced concern during bouts of market volatility. Retirees often use deferred annuities, which pays them a regular income or lump sum at some future date, to supplement their other retirement income, such as Social Security.

More than half of retirees say they are consolidating finances-including accounts and numbers of financial professionals they work with. The latest Principal® Retirement Security Survey provides financial professionals with timely reasons to reach out to retirees and those nearing retirement to position themselves as a "go to" financial professional.

Retirees are taking time to reflect on the financial advice they would give their younger selves. When it comes to saving and investing, the majority of retirees recommend starting to plan early (69%), even during 20s as they enter the workforce. Retirees highlight more advice:

  • Continue to be a life-long learner on finances, health, and wellness (57%).

  • Stay healthy (52%).

  • Balance saving for the future and living for today (43%).

  • Select a deferral percentage that takes advantage of the employer match (39%).

  • Work with a financial professional to help develop a plan (39%).

  • When choosing a life partner/spouse, choose one who also values financial health and wellness (36%).

  • Pick a profitable career (18%).

"Nearly two-thirds of workers anticipate the pandemic will somehow impact their path to retirement," said Reddy. "Uncertainty is part of life. The good news is we can take small measures to support our long-term resilience against unpredictable shocks in the future."

About the Quarterly Principal Retirement Security Survey

Principal conducts periodic "pulse" surveys with customers, financial professionals, and consultants to gain their insights about how timely topics might be impacting them. The October survey findings explore consumer concerns and actions surrounding saving for retirement, financial behaviors related to market volatility, and COVID-19. More than 630 U.S. residents (41% retirees and 60% workers) who have at least one financial product or service with Principal participated in the study between the months of August-September 2020.

About Principal®

Principal helps people and companies around the world build, protect, and advance their financial well-being through retirement, insurance, and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals—offering innovative ideas, investment expertise, and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.

Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker-dealers. Principal National, Principal Life, Principal Funds Distributor, Inc. and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392.

Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.

© 2020 Principal Financial Services, Inc.

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Contacts

Media Contact: Lonnetta Ragland, ragland.lonnetta@principal.com, 515-878-1504