COVID-19 Pandemic Wreaking Havoc On Americans’ Retirement Plans

MINNEAPOLIS –  The COVID-19 pandemic is drastically changing how Americans view their retirement prospects and many fear the worst is still yet to come – at least in the short-term. According to the Q2 Quarterly Market Perceptions Study from Allianz Life Insurance Company of North America (Allianz Life®), 58% of Americans say the economic impacts of COVID-19 are having a negative effect on their retirement savings, and 54% say they are worried the market hasn’t bottomed out yet.

Worries over market volatility’s impact on their nest egg were steadily increasing over the past year, currently at 42% (up from 37% in this time last year). At the same time, the number of people who are worried about a major recession is at its highest levels in over a year, now at 65% (up from 48% in Q2 2019). However it’s not all bad news, as a surprising seven in 10 (69%) respondents say they still feel optimistic that there is time to rebuild their nest egg, even if the market continues to drop.

“There was definitely angst about market swings before COVID-19, but the economic impacts of the pandemic are having a devastating effect on retirement saving,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “People are reassessing their financial strategies in light of current risks, and unfortunately, almost half say they have either reduced or stopped saving for retirement altogether because of the pandemic. The good news is people seem to be taking a long-term view and looking ahead to what’s next.”

Looking ahead to a recovery

While some may be making the difficult decision to divert funds from retirement saving into more urgent needs, others are looking ahead to how they can take advantage of the current situation and make up lost ground.

Interestingly, an increasing amount of respondents say now is a good time to invest in the market, currently at 42% - its highest level in a year (38% in Q1 2020; 34% in Q4 2019; 35% in Q3 2019; 37% in Q2 2019). But still over half (52%) said it is a good time to stay neutral and not take any action with their investments, and 44% are keeping what they have invested in, but not adding any new money at this time.

Impacts of the pandemic

Few could have predicted the full breadth of financial strain the country would undergo as a result of the pandemic, and the majority of people (57%) say they wish they had a better financial plan in place before the pandemic hit.

“The events of the past few months put a spotlight on the need for building risk management and protection into a portfolio,” said LaVigne. “While these types of black swan events are few and far between, people should start to think about how their can protect their retirement savings from unanticipated events because unfortunately, they do happen.”

Increased focus on protection

After the end of the bull run and subsequent major market drops, many people are shifting priorities and looking at protection products. Over seven in 10 (72%) say the effects of COVID-19 on the economy are making them rethink how to better protect their retirement savings from market volatility.

At the same time, the number of people who agree that it is important to put some money into a financial product that offers a balance of potential growth and some level of protection jumped to 32% from 27% in Q1. Further, 45% say they are willing to give up some potential gains for a financial product that protects a portion of their retirement savings, up from 38% last quarter.

“Market volatility over the past 6-8 weeks should serve as a wake-up call to anyone who doesn’t have protection against risk built into their retirement portfolios,” said LaVigne. “It’s never too late to work with a financial professional who can assess your current situation, and help you prepare for when the next market drop happens.”

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America, one of the FORTUNE 100 Best Companies to Work For® and one of the Ethisphere 2020 World’s Most Ethical Companies®, has been keeping its promises since 1896 by helping Americans achieve their retirement income and protection goals with a variety of annuity and life insurance products. In 2019, Allianz Life provided additional value to its policyholders via distributions of more than $10.4 billion. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with over 147,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.

 

Allianz Life conducted an online survey, the 2020 Q2 Allianz Life Quarterly Market Perceptions Study May 2020 with a nationally representative sample of 1,005 respondents age 18+.

Allianz Life conducted an online survey, the 2020 Q1 Allianz Life Quarterly Market Perceptions Study March 19-22, 2020 with a nationally representative sample of 1,003 respondents age 18+.

Allianz Life conducted an online survey, the 2019 Q2 Allianz Life Quarterly Market Perceptions Study in May 2019 with a nationally representative sample of 1,006 respondents age 18+.