As COVID-19 resets Americans' retirement plans,
surveys highlight the need for financial guidance to maximize benefits
July 30, 2020 By Mary Beth Franklin
The
COVID-19 pandemic has had a dire impact on many Americans’ retirement plans,
with more than a third of respondents in a
newly released survey from Nationwide Retirement Institute
saying they would have to retire later or not retire at all. And while many
retirees rely on Social Security as a major source of their retirement income,
more than 60% of adults surveyed say they now worry about Social Security running
out of money during their lifetime.
Two
separate surveys, which were conducted on behalf of the Nationwide Retirement
Institute before and during the COVID-19 pandemic, highlight the concerns
consumers have about Social Security. In fact, 63% think it is more important
now than ever before to optimize Social Security benefits. And more than
one-quarter of respondents who are eligible to claim Social Security say the
pandemic caused them to change their decision about when to file
for benefits.
“Americans
are facing complex retirement scenarios as a result of the COVID-19 pandemic
and market volatility,” said Tina Ambrozy, senior vice president of strategic
customer solutions at Nationwide. “On top of this, adults across generations
lack a basic understanding of Social Security benefits and ways to maximize
those benefits.”
Of the
38% of respondents who said COVID-19 has impacted their retirement plans, 6%
said they had been forced into early retirement due to job loss, 19% said they
plan to delay their retirement date, and 10% said they plan never to retire.
More than
a quarter of respondents who are currently eligible to claim Social Security
said the pandemic has altered their plans about when
to file for benefits, evenly split between those who expect to
file earlier than planned and those who hope to delay claiming.
The
original Nationwide survey was conducted in February, before the pandemic
began, and was supplemented with online survey in mid-May. The surveys reveal a
big knowledge gap among adults of all ages about how Social Security works,
including eligibility ages for reduced or full benefits, how lifetime earnings
affect benefits and how much of pre-retirement income Social Security benefits
are likely to replace.
A
separate online poll conducted by MassMutual in
mid-March among 1,500 Americans age 55 to 65 revealed a similar lack of
understanding of how Social Security works. One-third of respondents in the
MassMutual survey failed a basic quiz about Social Security retirement
benefits, while another 19% barely passed with a D grade. Only 3% scored an A+
by answering all 12 true or false statement correctly.
Given the
lack of knowledge about Social Security across generations, the need for
guidance from financial professionals is significant. More than three-quarters
of adults (86% of millennials, 93% of Gen Xers and 74% of baby boomers)
in the Nationwide survey who either work with a financial adviser or who plan
to ask one about Social Security say that if a financial professional wasn’t
able to show them how to maximize their Social Security benefits, they would
find one who could.
“With so
much uncertainty, many people are looking for help in identifying ways to take
better control of their finances,” Ambrozy said. She pointed to free tools that
financial advisers can use to help clients maximize their Social Security
benefits, including the Social Security 360 Analyzer, which identifies optimal
claiming strategies, generates client-ready reports to help guide
conversations, and evaluates breakeven and cash flow analyses.
“In today’s
environment amid the pandemic and recognizing the gap in consumer knowledge and
misconceptions about Social Security, we want to make sure financial
professionals are equipped to handle those discussions,” Ambrozy said.
Separately,
the Alliance for Lifetime Income released its
latest tracking study, which shows a majority of Americans who
are nearing retirement are rethinking their plans. Conducted in June among
Americans ages 56 to 75, the study contributes to mounting evidence that a
retirement reset is underway in the U.S.
A
majority of the respondents — 70% — report that pandemic has made them more
pessimistic about their retirement plans. As a result, an estimated 3.2 million
people have now decided to retire later than originally planned.
“The
pandemic and resulting economic uncertainty and market volatility are leading
the vast majority of the country’s pre-retirees to reconsider their retirement
plans,” said Jean Statler, the group’s CEO.
Check out
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