COVID-19 Impacts on Retirement Savings Vary By Key Demographic Factors
- Author: William Asher
- Posted: 2024-07-01
COVID-19 Made It More Difficult to Save for Retirement
Retiring isn't cheap. For decades, Americans have struggled to save enough for what should be their "golden years." Economic difficulties that lead to turbulent markets, widespread job losses and high inflation only enhanced the difficulty that people had with saving for the future. During the pandemic, tens of millions of Americans lost their jobs. Those who were already retired or semi-retired and working part-time also found themselves in a difficult situation. Their investment values plummeted, or the part-time jobs they had dried up when government authorities ordered shutdowns in order to mitigate the spread of COVID-19. Some seniors chose to leave their jobs and stay safe at home. Others had to step up and help family members who lost childcare when childcare centers and schools closed for months.
How Many Americans' Retirement Savings Have Been Affected By the Pandemic
About 17% of working Americans say they're saving less money for their retirement as a result of the COVID-19 pandemic. Surprisingly, about 16% say they've been able to save more money. White-collar workers who were able to work from home saved more because they weren't spending money on take-out, coffee from pricey coffee shops, fuel and vehicle maintenance, parking and other work-related expenses.
Who Has Been Affected By Pandemic-related Drops in Retirement Savings
Just like the job losses caused by the COVID-19 pandemic were not uniform across ages, industries, education levels, genders or income levels, the impacts on retirement savings are also out of sync. Geography, gender and age all played an impact on a person's ability to save for retirement over the past two years.
Location of Residence
Residents in the Northeast were more likely to have enough money each month to save for retirement compared to those in other parts of the country. Of those who said they have saved more for retirement since the onset of the pandemic, 44% reside in the Northeast and 14% reside in the South. Among those saving less, 31% live in the South. A state's minimum age, unemployment rate, cost of living and dependence on tourism also factored into whether or not the residents were saving more or less money for retirement during the COVID-19 pandemic.
Gender
Fewer men than women have lost their jobs since the start of the COVID-19 pandemic, and it makes sense that men were more likely than women to be able to save more for retirement during the past two years. About 59% of men reported saving more compared to 41% of women. Before the pandemic, this gender gap was not as wide. A 2019 Bank of America report noted that women start retirement with $70,000 less than men. Women have a longer life expectancy, so they have to live longer on less money. Women were also more likely to work in sectors of the economy that were hard-hit by shutdowns. These industries include hospitality, retail, childcare and personal care services.
Age
Surprisingly, Millennials were more likely to save more for retirement during the COVID-19 pandemic than any other age group. Among Americans aged 25 to 34, 35% have saved more for retirement since the start of the pandemic. Of those who are saving less for retirement due to COVID-19, 25% are Gen Xers. Gen X will be the next generation to start retiring.
What the Pandemic Did to Existing Retirement Savings and Investments
The economic upheaval of the pandemic, especially on the stock market, demonstrated that even those who have saved were not immune from the havoc caused by the pandemic. Many saw their investments tumble in value during the first month of shutdowns. Turbulence in stocks caused some people to put their money elsewhere. Many chose cryptocurrency, but those investments have also proven volatile over the past two years. To the surprise of many, homes have been one of the best investments, with sales prices increasing 20% over the past 12 months.
