Allianz Life’s 2020 Retirement Risk Readiness Study, published earlier this year highlights the fact that for most Americans choosing when they will retire is likely out of their control. The survey found that more than 50% of Americans were forced to leave the job market earlier than they anticipated as job loss (34%) and health (26%) were cited as the primary reasons.
For those folks who thought that they still had good earning years left to set aside financial resources for retirement, having the proverbial rug pulled out from under them means that their golden years are likely to be tarnished. Importantly, this survey was conducted in January (results were published in April) prior to the Covid-19 crisis that pulverized America’s labor force. One can only imagine the long-term toll this has taken on those who thought that they were on a decent path to financial security.
The study focused on three categories of Americans: pre-retirees (those 10 years or more from retirement); near-retirees (those within 10 years of retirement); and those who are already retired. Given how unprepared many Americans are for retirement, and the situation has only gotten worse, 65% of non-retirees said that they would likely work or have to work in retirement. The reality is that only 7% of retirees actually have at least a part-time job. The fact that 37 million Americans have filed for initial unemployment claims in the last 7 weeks have likely exacerbated the lack of access to employment.
Most Americans know that they aren’t prepared for retirement, but there is little that they can do, as daily living expenses eat up most of their financial resources. Again, Covid-19 is highlighting just how fragile the economic situation is for most Americans. Defined contribution plans were never intended to be used as one’s primary retirement vehicle, but as supplemental income funds. Who has any supplemental income? We need a retirement system that has the defined benefit pension as the foundation of any retirement program. Without this support, too many Americans will fall onto the social safety net long before they die. That is just not acceptable!