Tight budgets are the obvious obstacle, but not the only one. “A lot of it has to do with time,” said Kristi Rodriguez, senior vice president of the Nationwide Retirement Institute at Nationwide Financial. “They are truly in the middle of their prime working years. They’re trying to take care of their adult children and sometimes younger children. They’re also taking care of individuals older than them.” Retirement preparation can fall by the wayside.
The pandemic hasn’t helped matters. A July report by the Center for Retirement Research at Boston College assessed the proportion of working-age Americans “at risk of being unable to maintain their pre-retirement standard of living.” The “at risk” figure for 40-to-49s rose from 51.7% to 55.3% after the “employment shock” of the pandemic. For 50-to-59s, it rose from 44.2% to 51.0%. In July polling for Northwestern Mutual, 25% of Xers said the pandemic had prompted them to push back their planned retirement age.
For some, the pandemic has had the salutary effect of increasing a sense of urgency about saving for retirement. Of course, there are wide disparities among different income levels in Xers’ ability to save for retirement. And money put aside may not stay there. Many Xers have raided their retirement accounts to cover current expenses during the pandemic. In MagnifyMoney polling from April and May, 40% of Xers (ages 40 to 54) reported doing so. Less drastically, 13% had “paused” their contributions and 23% had reduced them. In a November survey by The Harris Poll, 36% of 35-to-49s reported having stopped or reduced their saving for retirement.
Workers with inadequate retirement savings talk of finessing the problem by working in their retirement years. In July polling by Ipsos for Voya Financial, 60% of employed Xers said they “plan to work in retirement as a result of the pandemic.” This is hardly a reliable plan, though, as many people end up involuntarily retired, often due to job loss or health problems. “The reality is, at some point you don’t necessarily get a choice,” said Jim Miller, vice president of banking and payments intelligence at J.D. Power. “If you lose your job in your early to mid-60s, getting another job that makes a meaningful difference replacing that income is very challenging.”