Pandemic said to wreak havoc on retirement plans

BUSINESS WIRE - The COVID-19 pandemic is changing drastically how Americans view their retirement prospects, and many fear the worst is still yet to come - at least in the short term, according to a recent study by Minneapolis-based Allianz Life Insurance Co. of North America.

The Q2 Quarterly Market Perceptions Study shows 58% of Americans say the economic impacts of COVID-19 are having a negative effect on their retirement savings, and 54% say they're worried the market hasn't bottomed out yet.

"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," says Kelly LaVigne, vice president of consumer insights at Allianz Life.

Worries over the market volatility's impact on their nest egg were steadily increasing over the past year, currently at 42%, up from 37% a year ago. 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.

"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," LaVigne says.

For its quarterly studies, Allianz Life conducts online surveys involving nationally representative samples of more than 1,000 adults each quarter.

The Q2 Quarterly Market Perceptions Study isn't all bad news, however. A strong majority of respondents (69%) say they still feel optimistic that there's time to rebuild their nest egg, even if the market continues to drop.

"The good news is people seem to be taking a long-term view and looking ahead to what's next," LaVigne says.

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, he contends.

An increasing number of respondents say now is a good time to invest in the market, currently at 42% - its highest level in a year, according to the most recent survey results. However, 52% still say it's a good time to stay neutral and not take any action with their investments, and 44% are keeping what they have invested, but not adding any new money at this time.

Lavigne says 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," says LaVigne. 'While these types of black swan events are few and far between, people should start to think about how they can protect their retirement savings from unanticipated events, because unfortunately, they do happen."

After the end of the bull run and subsequent major market drops, many people are shifting priorities and looking at protection products, the study shows. Nearly three-quarters of respondents say the effects of COVID-19 on the economy are making them rethink how to protect their retirement savings better from market volatility.

At the same time, the number of people who agree that it's important to put some money into a financial product that offers a balance of potential growth and some level of protection jumped to 32% in Q2 from 27% in Ql. Further, 45% of respondents say they're willing to give up some potential gains for a financial product that protects a portion of their retirement savings, up from 38% in Ql.