Roughly eight-in-10 Americans (82%) say the events of the past year have negatively impacted their retirement plans, and 55% of Americans said their retirement goals have been delayed by at least two years and one-third estimating it will take 2-3 years to get back on track, due to such factors as job loss or taking retirement withdrawals.
Despite these disheartening findings from Fidelity Investments’ 2021 State of Retirement Planning Study, released March 24, the vast majority are still confident they’ll be able to retire when and how they want, and 36% are now even more confident in their retirement plan than before.
As the largest retirement provider in the U.S., Boston-based Fidelity works with a broad spectrum of savers who have a diverse set of financial needs, challenges and goals, and the study, which focuses on the impact of the past year on retirement plans, points to the positive impact having a retirement plan in place can have on helping people weather the storm.
Still, according to the findings, 79% of respondents indicate they re-evaluated their priorities this past year, and while the level of concern has diminished in some areas since the start of the pandemic, when compared against the pre-pandemic world, people are still more stressed than before on several fronts.
“This past year has been a roller coaster, but for those Americans with a retirement plan, it should come as a relief to know the fundamentals remain sound,” said Melissa Ridolfi, senior vice president of Retirement and Cash Management at Fidelity Investments. “Although the survey indicates 36% of Americans are more concerned now than at the start of the pandemic on their ability to maintain a nest egg in retirement, at Fidelity, we saw retirement savings accounts reach record levels in the fourth quarter of 2020 and also experienced record levels of planning engagements with clients throughout the year. This is a remarkable validation of the faith so many retirement savers have in their own financial future and their ability to move forward confidently.”
Overall, when it comes to how people are planning for retirement, Americans fall into three categories, with one-third saying they have a plan in place to achieve their goals. Thirty-one percent have thought about it in great detail while 34% say they have thought about it but have yet to start planning.
Here’s where the power of planning comes in: the study offers strong evidence of a transformative effect on one’s financial outlook for those who have started thinking in detail about how to afford the retirement they want.
Across the board, those with the most detailed plan in place to achieve their goals reported experiencing the greatest confidence. However, even the simple act of getting started on a plan can have a positive impact.
When asked at what point in the retirement planning process people started feeling more relaxed about their situation, it appears that the experience is highly personal and that there are a number of points that people find emotionally gratifying.
Interestingly, Millennials are slightly more likely than their older counterparts to report having a plan to afford their desired lifestyle in retirement (35%), compared to Gen Xers (34%) or Boomers (32%), even though Boomers are closest to retirement.
Part of this may be attributed to the fact that Millennials are nearly twice as likely to have reported using online tools and calculators than Boomers. These tools can provide the instant gratification of seeing a plan taking shape with just a few clicks, something many have become accustomed to in a digital age.
Additionally, the key considerations, or ingredients for a “plan” differs by generation. For those 30 years from retirement, including most Millennials, having a plan means they have determined how much they should be saving on a regular basis and what accounts they should put those savings into based on tax and investing considerations. As people start to get closer to retirement, they need to think and plan for more complex topics.
“The study findings clearly show that creating a plan for retirement can lead to a greater sense of confidence and control and ultimately give people a better feeling about where they stand at any age,” Ridolfi said.
Fidelity Investments’ 2021 State of Retirement Planning Study presents the findings of a national online survey, consisting of 1,204 adult financial decision-makers who were not retired. Respondents had at least one investment account and those over age 34 had at least $100,000 investable assets.
For a detailed look at the study, click here.