COVID-19 is driving employees’ anxiety about long-term retirement savings and prompting more to believe they’ll have to retire later than originally planned, according to new research from Charles Schwab & Co.
The financial services firm’s survey of 1,000 workers found that saving enough for a comfortable retirement continues to be workers’ leading source of significant financial stress. On average, 401(k) participants believe they need to save $1.9 million for retirement, an increase of 12% from the $1.7 million reported in last year’s survey.
Saving for retirement has always been a top financial stressor for employees, even “when the markets were setting records and we were living through the longest bull market in history,” says Catherine Golladay, executive vice president and head of workplace financial services at Schwab. “Now, we are in a new reality where people are trying to navigate the health and financial challenges right in front of them, while also worrying about their long-term goals. It is a lot.”
Retirement has become a sensitive topic in the midst of COVID-19. Not only have 401(k) balances dropped significantly due to market volatility, but a handful of employers have halted or reduced retirement matches or are considering doing so. An April survey of 369 firms by consultancy Pearl Meyer found that about 6% of companies have reduced or eliminated employer contributions or matches to their retirement plan, while 16% were considering doing so. A Fidelity Investments poll of 1,000 employers around the same time found that around 10% indicated they have suspended or are planning to suspend or reduce their match.
Despite the bad news surrounding 401(k)s, Charles Schwab’s survey did find some good news: A sizable percentage of 401(k) participants are aiming to take control by getting more engaged in their retirement planning.
For instance, 41% of survey respondents say they have made changes to their 401(k)–of those, 14% rebalanced their portfolio and 12% increased their contribution rate. Those individuals also indicated that they either increased (8%) or decreased (7%) their exposure to stock funds/equity. More also say they’ve turned to a financial adviser since the outbreak started, and two-thirds of those have acted on what they learned. Most are rebalancing their accounts (26%) or increasing their contributions (22%).
“We are very encouraged to see so many 401(k) participants actively engaging with their retirement accounts during this uncertain time,” Golladay says.