At a Glance | May 14, 2020 How the COVID-19 Pandemic Could Impact Retirement Income Adequacy for U.S. Workers Using the EBRI Retirement Security Projection Model® (RSPM), we examined three different market assumptions. 1 The Retirement Savings Deficit for All U.S. Households Before the COVID-19 Pandemic $3.68 Trillion Retirement Deficit Aggregate value of retirement savings deficits for all U.S. households, ages 35–64, as of January 1, 2020 IMPACT OF INVESTMENT LOSSES Projected Deficit Increase Due to the Current Pandemic Under Optimistic, Intermediate, and Pessimistic Market Loss Assumptions Market volatility may be the Increase in Deficit largest factor during this crisis in increasing retirement Optimistic: Market Losses Restricted to Half of 1st $84.98 Billion / +2.3% Quarter 2020 Losses deficits, especially under the pessimistic assumptions. Intermediate: Market Losses Equivalent to 1st Quarter $136.43 Billion / +3.7% 2020 Losses Pessimistic: Market Losses Equivalent to 2007–2009 $330.88 Billion / +9.0% Financial Crisis Losses IMPACT OF BEHAVIORAL CHANGES Increase in Retirement Deficits Above the $136.43 Billion Experienced in the Intermediate Market Loss Assumption Match suspensions, reduced contributions, increases in Scenario 1: Plan Sponsors Suspend Matches $2.09 Billion withdrawals, and decreased 20% Suspend Match for 1 Year eligibility do not have as much Scenario 2: Scenario 1 + Reduced Contributions $2.31 Billion impact, though they could have 20% Reduction of Contributions by Participants With Suspended Matches for 1 Year a significant influence on individual households. Plan $31.24 Billion Scenario 3: Small Plan Terminations terminations would have the 40% of Plans With <$10 Million Terminating greatest impact on retirement $1.03 Billion Scenario 4: One-Time Increase in Withdrawals income adequacy. 13.2% Increase in Withdrawals for 1 Year $4.23 Billion Scenario 5: Decrease in DC Eligibility 10% Decrease in Eligibility for 2 Years Due to Unemployment AGGREGATE IMPACT Aggregate of Market Loss Assumptions Combined With Scenarios 1–5 Above The combined impact of all intermediate assumptions, Optimistic Market Loss Assumption + Aggregate Impact $96.29 Billion / +2.6% of Optimistic Scenarios although damaging, appears manageable. Even the Intermediate Market Loss Assumption + Aggregate Impact $166.21 Billion / +4.5% combination of pessimistic of Intermediate Scenarios assumptions only increased the Pessimistic Market Loss Assumption + Aggregate Impact $412.77 Billion / +11.2% aggregated retirement deficits of Pessimistic Scenarios by 11.2%. 1. Retirement savings deficits are the present value of retirement deficits for those households simulated to run short of money in retirement. SOURCE: Jack VanDerhei, “Impact of the COVID-19 Pandemic on Retirement Income Adequacy: Evidence From EBRI’s Retirement Security Projection Model®,” EBRI Issue Brief, no. 505 (Employee Benefit Research Institute, April 21, 2020). © 2020 EBRI This report is copyrighted by the Employee Benefit Research Institute (EBRI). You may copy, print, or download this report solely for personal and noncommercial use, provided that all hard copies retain any and all copyright and other applicable notices contained therein, and you may cite or quote small portions of the report provided that you do so verbatim and with proper citation. Any use beyond the scope of the foregoing requires EBRI’s prior express permission. For permissions, please contact EBRI at permissions@ebri.org.