Despite COVID-19’s severe health impact on aging adults, older Americans report they are coping far better both emotionally and financially than younger adults, according to a new Edward Jones and Age Wave study released Tuesday.
“COVID-19’s impact forever changed the reality of many Americans, yet we’ve observed a resilience among U.S. retirees in contrast to younger generations,” said Ken Dychtwald, CEO of Age Wave, in unveiling the new joint research project, The Four Pillars of the New Retirement.
The extensive study of more than 9,000 people across five generations in the U.S. and Canada uncovered a new definition for retirement that encompasses far more than simply the end of work. The majority of U.S. retirees — 55% — defined retirement as a whole new chapter filled with new choices, freedoms and challenges across four interconnected areas of their lives: health, family, purpose and finance.
Increasing longevity means more people have longer retirements, making retirement a more important stage of life. As the outsized baby boomer generation moves into retirement (about half are already retired), they are swelling the ranks and the economic importance of retirees.
COVID-19’s initial dramatic impact on the U.S. economy and personal finances may have long-lasting implications for families and their financial advisers. And there is a lot of money at stake.
“Men and women age 50-plus control more than 70% of total wealth, representing the greatest concentration of wealth in human history,” said Dychtwald. “This stage of life is about to get busy and take up a bigger footprint.”
Two-thirds of Americans said the pandemic has brought their families closer together emotionally, even if they had to remain physically apart. Reflecting the enhanced intergenerational connectivity, the study found that 24 million Americans have provided financial support to adult children as a result of COVID-19, and an overwhelming 71% of retirees said they would offer financial support to their family even if it could jeopardize their own financial future.
Older generations — including both retired baby boomers and members of the silent generation that preceded them — have fared better during the pandemic both emotionally and financially as most have fewer responsibilities around work and family and they rely less on income from employment.
Retirees tend to be more insulated from financial shocks through Social Security and Medicare. Individuals receive an average of $1,500 per month in Social Security benefits while couples receive an average of $31,000 per year.
Most retirees also have the security of home ownership. More than three-quarters of retirees own their own home with 60% of them having paid off their mortgages. And older Americans are more likely to be receiving guaranteed defined-benefit pensions from their former employers.
In contrast, the pandemic has significantly reduced the financial security of a quarter of Americans, with the greatest impact on younger generations, particularly those who have lost jobs and health insurance coverage.
Those planning to retire are feeling less confident now about how much they are saving for retirement, with only 46% expressing confidence, compared to 58% before the pandemic struck. And 20 million Americans have stopped making regular retirement saving contributions.
“We’ve certainly seen COVID-19’s disruptive force on finances, with the pandemic influencing retirement timing and financial confidence,” said Ken Cella, principal in the client services group of Edward Jones. “However, this could has brought several silver linings in terms of family closeness and important discussions about planning earlier for retirement, saving more for emergencies and even talking through end-of-life plans and long-term care costs.”
As Americans redefine retirement in new broader terms, the majority of U.S. respondents described their ideal financial adviser as a guide who can understand them and help them achieve their goals. And more than 80% of those working with a financial adviser said that professional relationship gave them a greater sense of comfort regarding their finances during the pandemic.
But figuring out how to tap their savings in retirement can be confusing and retirees need help. More than one-third of retirees surveyed (36%) said managing money in retirement is more confusing than saving for retirement. More than half of the retiree respondents (52%) cited health care costs, including long-term care, as their most common financial worry.
And despite the high risk that many older adults face during the pandemic, it isn’t COVID-19 that scares them. It’s Alzheimer’s and other forms of dementia.
“Beyond finances, we can help our clients envision and truly realize a holistic retirement which we know includes decisions about their health, family and purpose,” Cella said.
Check out Mary Beth Franklin’s Retirement Repair Shop podcast.
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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.