The COVID-19 pandemic has been rough on many older Americans, forcing some into early retirement as the result of personal health concerns, job losses triggered by the economic slowdown, or caregiving responsibilities for family members affected by the virus.
Unplanned early retirement can leave retirees in a tough spot financially as they simultaneously lose out on time when they had planned to save for retirement and face a longer retirement in which they have to cover expenses. Retirees who left the workforce due to illness may have additional medical expenses to cover as well.
To determine how retirees are faring during the pandemic, Clever Real Estate, an online education platform for home buyers, sellers and investors, surveyed 1,500 Americans in November about their retirement funds, debt and financial worries. The results of that survey, plus a compilation of retirement statistics from leading government agencies and nonprofit research organizations, form the basis of a new report, State of Retirement Finances 2021.
“Unfortunately, half of U.S. households can’t maintain their pre-retirement standard of living throughout retirement,” Francesca Ortegren, chief data scientist at Clever Real Estate, wrote in the new report. “Many Americans are forced to tighten budgets and give up luxuries during retirement.”
Those results are supported by the National Retirement Risk Index created by Center of Retirement Research at Boston College, which measures the share of American households that are at risk of being unable to maintain their pre-retirement stands of living in retirement even if the households continue to work until age 65 and annuitize all their financial assets, including tapping home equity through a reverse mortgage. In the wake of the pandemic, the share of households at risk increased modestly to 51%, according to a newly released index update from the Center for Retirement Research.
Only about three in ten retirees retired when they had planned, according to the online survey that Clever Real Estate conducted in November.
Of those who did not retire when they had planned, 59% reported retiring earlier. The majority said they were forced into early retirement because of health issues (65%), job loss (22%) or because they had to care for a family member (10%).
“The COVID-19 pandemic has likely contributed to an increase in unexpectedly early retirements and worries about health, considering the virus disproportionately impacts older adults,” Ortegren wrote.
As a result, many retirees said they are struggling to maintain their pre-retirement lifestyle, and some are going into debt to pay for necessities like medical expenses, groceries, housing costs and insurance. Of those who reported having trouble covering their expenses, 47% said they struggled to pay medical bills more than any other type of cost.
Retirees more than doubled their debt in 2020, to nearly $20,000, as the average retiree took on an additional $9,979 in non-mortgage debt. That is a 104% increase in total retiree debt from the prior year, according to the report. Although working-age adults carry more debt — an average of $44,000 — non-retirees increased their debt by a smaller percentage during the pandemic — just 13% or about $5,000.
Some of that increased debt load is the result of more people carrying credit card debt. In fact, the percentage of retirees carrying credit card debt has increased over the last decade, including a 48% jump between 2019 and 2020 alone, according to the National Council on Aging.
On average, retirees accumulated $177,787 in retirement savings, less than half of the recommended level. Survey respondents said are aware they did not save enough — just 35% believe they prepared adequately for retirement.
Sparse retirement funds leave many retirees reliant on Social Security to cover most of their expenses. In fact, nearly 60% of older adults’ household wealth comes from Social Security. In 2021, the average Social Security benefit is $1,543 per month — much less than the typical retiree’s spending of $3,900 per month.
Struggling to make ends meet has forced some older Americans to go back to work during their retirement, with 16% of respondents reporting that they earn income from part-time employment, contract work or self-employment, according to the Clever Real Estate survey. That includes 9% of retirees who said they were forced to find part-time work because of the pandemic.
The top reasons cited for working during retirement include retirement savings and Social Security are not enough to cover expenses (48%); social interaction (37%); additional discretionary income (35%); and employee discount or other perks (32%). But nearly a third of respondents who work — 30% — said they do it because they want to, not because they need the money.
As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.