EBRI Issue Brief

Staying Optimistic: Elderly Americans’ Retirement Expectations Remain Uninterrupted Despite COVID-19 Impact

Aug 4, 2022 18  pages

Summary

Employees’ retirement expectations have played important roles in predicting retirement decisions, making policy proposals, and designing financial products and services to help American workers better plan for their future retirement. From stochastic retirement readiness model design to Social Security benefits projection estimations and from defined contribution (DC) plan saving strategy to Monte Carlo retirement goals success rate calculations, people’s expected retirement age is a crucial factor for industry advisors, academics, and financial planners to design retirement services and projection models, study decision behaviors, and make sound advice for their clients. In this Issue Brief, we focus on investigating the potential influence of COVID-19 on the participants’ working and financial situations in 2020, as well as their decisions regarding retirement and Social Security claiming ages.

Key Findings:

  • Based on the 2020 Health and Retirement Study (HRS), COVID-19 had affected elderly American adults’ work and financial situations to a large extent. But the retirement expectations of these respondents seem to remain the same despite the impacts.
  • The average percentages of participants who reported their work was affected by COVID-19 do not differ substantially by their demographic and economic status variations (such as age groups and wage cohorts). However, among those respondents with relatively fewer years of education, male participants are more likely to report their job was affected by the COVID-19 pandemic than female participants.
  • Although there is generally a natural upward trend for elderly American adults to expect a later and later retirement age, this natural trend of delaying retirement has no statistically significant relationship with the COVID-19 pandemic.
  • Elderly American adults did not adjust their retirement expectations significantly, including planned retirement age and Social Security benefit claiming age, despite many respondents indicating that the COVID-19 pandemic had impacted their work and financial situations in the 2020 HRS.

According to the 2020 HRS, approximately 60 percent of the respondents reported that their work was affected by the COVID-19 pandemic, 55 percent of them said they had to stop work entirely, 15 percent of them lost their job permanently, and about 20 percent of them indicated that their work became harder or more risky or dangerous. However, as far as the financial situation goes, around 76 percent of the participants stated that their financial situation remains the same, and 60 percent of them indicated that their household spending did not change in 2020. On average, no particular wage group indicated that their work was significantly more affected by COVID-19 than other groups. The average percentages of participants who reported COVID-19 impact on their work did not differ substantially across age cohorts, either. Male participants were more likely to report their job was affected by the COVID-19 pandemic than female participants, especially among those cohorts who have relatively fewer years of education. Although generally speaking, there is a natural upward trend for elderly Americans to anticipate a later and later retirement age longitudinally based on the HRS survey from 1992 to 2020, statistical tests demonstrated little relationship between this natural tendency to delay retirement and the COVID-19 pandemic impact. The results of this study imply that elderly American adults’ retirement expectations remain uninterrupted despite enduring through the COVID-19 impact on their work and financial situations in 2020.