How is the pandemic-caused recession affecting retirement savings? Of those who said they have retirement accounts, 48% said that their retirement savings had not recovered to pre-pandemic levels by December 31, 2020, in our recent Senior Survey. The coronavirus-caused recession appears to be forcing many older adults to rethink retirement budgets and plans. The U.S. stock market ended 2020 at an all-time high with the S & P stock index finishing the year up more than 16%. But the retirement savings held by many retired adults do not appear to have benefited from the run up.
TSCL’s Senior Survey is open to all adults who wish to participate and is conducted online. Our findings are based on responses collected from mid-January to March of this year. We asked the following question, “How has the coronavirus-caused recession affected the value of your retirement savings as of December 31, 2020?” Some 18% of survey participants reported that they had no retirement savings at all. Of those with retirement savings, almost half — 48% — reported that the value of their retirement savings was still down on December 31, 2020, compared to the value on December 31, 2019. Thirty-one percent reported that their savings had recovered to about the same value as on December 31, 2019. Only 22% reported that their savings had increased by December 31, 2020. Of this group, only 9% said their savings had increased by more than 10 percent.
TSCL is concerned that such a drop of retirement savings during 2020 could have a profound and life changing impact on the retirement security of many older Americans. This is especially true if the economic recession (characterized by high unemployment) continues to drag on during 2021. Those who have lost a significant amount of their savings might try to return to work but finding a job may not be easy. Those who were working and who lost a job might also have lost their employer-provided healthcare coverage and employer contributions to retirement plans. These people may wind up working for lower earnings in the future and could potentially experience worse health if they can’t find affordable healthcare coverage.
All of this adds up to less money for retirement, and greater dependence on Social Security. This situation was caused by shutdowns in response to COVID-19 and illustrates why Congress needs to strengthen both Social Security and Medicare.
TSCL supports legislation that would:
- Strengthen Social Security benefit by providing a modest boost in benefits about $30 per month and tie the annual cost-of-living adjustment (COLA) to the Consumer Price Index for the Elderly (CPI-E). TSCL further supports legislation that would ensure the COLA is never lower than 3%.
- Increase the maximum taxable wage base so that the highest - earning workers pay their fair share of Social Security payroll taxes.
- Reduce Medicare prescription drug costs by allowing Medicare to negotiate drug prices and tying the rate of prescription drug price increases to the rate of inflation.