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Pre-pandemic financial concerns are highlighted in new research, as well as the impact the past year has had on… [+] retirees and non-retirees alike.
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COVID-19’s economic effects have been unevenly distributed among Americans, with worse outcomes for women, people of color, low-wage earners, and those with less formal education. New government and commercial sector study emphasizes the financial issues that existed before to the epidemic, as well as the impact of the last year on retirees and non-retirees alike. Many families were faced with the prospect of one or more breadwinner being laid off or working fewer hours. To make ends meet, some delved into rainy day funds or looted retirement accounts, while others need government assistance. Even as some of the health and financial consequences fade from view, it is evident that more has to be done to improve the financial resiliency and well-being of America’s workers and retirees.
Evidence suggests that government policy actions such as the CARES Act helped to mitigate the immediate repercussions, but we still don’t know all of the long-term implications for the economy and retirement savings in particular. As governments continue to focus on enhancing retirement security, several early indicators are worth noting.
Disparities in Demographics
According to research from the Global Financial Literacy Excellence Center (GFLEC) at George Washington University and the FINRA Investor Education Foundation, more than 60% of working-age adults in the United States reported feeling anxious about their finances even before their daily activities were disrupted in 2020. Those with lower incomes were significantly more concerned: Approximately two-thirds of households with annual incomes of less than $50,000 experienced anxiety, compared to fewer than half of those with yearly incomes of more than $100,000.
In 2018, 56 percent of all women, compared to 44 percent of males, felt worried when discussing finances. Women were more likely to be negatively impacted as the economic upheaval spread over the past year. “Women who were not working disproportionately reported that childcare and family duties stopped them from formal employment,” according to the Federal Reserve study on the Economic Well-Being of U.S. Households in 2020.
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Women are also less confident than males in handling their retirement investments, with fewer than one in three expressing this confidence, regardless of their educational level. Meanwhile, 60% of males with bachelor’s degrees indicated they were confident in their ability to manage retirement plans.
Race has a significant impact on how people feel about their finances and how they have been affected over the last year. According to the GFLEC/FINRA poll, Hispanic persons are substantially more likely to be concerned about their financial situation. Meanwhile, according to the Federal Reserve, only two-thirds of Black and Hispanic adults believe they are doing “well financially,” compared to 80% of White persons.
According to the Federal Reserve, “Black and Hispanic non-retirees were less likely to have retirement savings and to consider their retirement funds as on track.”
While many families had financial difficulties in 2020, those with adults with bachelor’s degrees were more likely than others to complete the year with a larger bank account balance or higher income than in prior years. “Adults with at least a bachelor’s degree were much more likely to be doing at least okay financially (89 percent) than those with less than a high school diploma (45 percent),” according to the Federal Reserve report.
Layoffs are especially onerous on people with less formal schooling. In 2020, people without a bachelor’s degree were roughly twice as likely as college graduates to be laid off. Part of the gap could be explained by those with a college education’s ability to work remotely, with 46% telecommuting exclusively throughout the epidemic.
Debt as a Motivator
While demographics shed light on some of the pre- and post-pandemic financial issues that Americans face, debt is a significant burden for both employees and retirees. According to the Government Accountability Office, 71 percent of elderly Americans now have debt, up from 58 percent in 1989. “From 2003 to 2019, adults in their late 70s generally had higher shares of late credit card and school loan debt than those aged 50-74,” according to the same study.
Many families claimed that they would be compelled to turn to lenders, such as credit cards, banks, and payday loans, to fulfill even a $400 emergency need as a result of the impact of layoffs, income cuts, and greater expenses linked with COVID-19. Nearly half of laid-off workers said they wouldn’t be able to pay their bills in full that month or would be unable to meet the minimal emergency spending criteria in November 2020.
Working families are finding it more difficult to focus on retirement security as their debt burdens grow. However, for those families, making ends meet is a much more pressing worry now. According to a Federal Reserve survey, 36% of renters who are having problems paying their bills would be evicted for non-payment of rent and would have nowhere to go.
Getting Ready for Retirement
COVID-19, according to the Federal Reserve, was a role in the timing of at least 29 percent of new retirees’ decision to quit working, while also making it more difficult for non-retirees to plan for their own golden years. In 2020, one out of every ten Americans used their retirement savings account for non-retirement spending, and 14 percent of workers who were laid off did the same. While this may have made meeting short-term expenses easier, it also leaves those folks with a larger retirement savings gap.
In 2020, 42 percent of non-retirees who were laid off did not have any self-directed retirement funds. Even more alarming is the fact that possessing such reserves was a predictor of the chance of being laid off in part. Self-directed retirement savings accounts were held by 74% of individuals who were not laid off.
COVID-19, in the end, served to exacerbate the retirement preparation of individuals who were already unprepared.
Perspectives on the Future
The GFLEC/FINRA study found that those who could properly answer three essential financial literacy questions were less likely to feel nervous about their finances, suggesting that improved financial literacy could help to alleviate many Americans’ concerns. But more must be done than simply providing workers and retirees with more information and knowledge.
A high link exists between the level of reported financial stress and anxiety and the likelihood of engaging in retirement planning. Simultaneously, retirement readiness has been found to be a major predictor of wealth, indicating the twin advantage of focusing not only financial knowledge but also generating opportunities for employees and families to save and enhance overall financial resiliency.
The necessity of comprehensive initiatives to address retirement security and overall financial well-being that fulfill the requirements of workers and retirees is highlighted in these new reports. Policymakers must investigate innovative approaches to addressing the various issues that individuals confront, as well as take into account the various experiences that households have had during the pandemic and its aftermath./nRead More

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