Much like how the Global Financial Crisis hit the economic wellbeing of many retirees so has COVID-19, with confidence in the quality of life in retirement and how long money will last being shaken. Returns on cash and term deposits are negligible and that doesn’t look like changing anytime soon, which augurs well for growth assets given interest rates appear to be ‘lower for longer’.
Allianz Retire+ conducted some research during the pandemic some months ago and they received over 1,000 respondents from current and prospective retirees. Here are some key findings.
1. Money is a recurring worry for retirees
24% of the respondents said they worried about making ends meet whilst 20% indicated money was a constant worry.
2. Spending even less on necessities, luxuries
75% of retirees said they were spending less on luxuries due to COVID-19. 68% of respondents said they were only buying necessities.
3. Many retirees did not feel financially secure
51% of those surveyed did not feel secure in their financial position.
4. Wealth destruction
36% of respondents said they had lost money during the COVID-19 market downturn. 13% believed they had experienced financial losses that would not be recovered during their retirement.
5. Vulnerable to another financial shock
61% did not believe their financial situation was safe in the event of another economic downturn.
6. Lack of control
45% did not feel in control of their financial future. Heightened market volatility was making many retirees feel they were at the mercy of global financial markets and unable to control their financial future.
7. Quality of life worries
34% of retirees worried about whether their finances would allow them to have a good quality of life.
8. Illness, market uncertainty top concerns
Top five concerns were:
- becoming ill (55%)
- unexpected costs (45%)
- losing a loved one (44%)
- not having enough money to live the life they wanted to live in retirement (34%)
- the risk of one-off market downturns (32%)
9. More conservative approach
62% of surveyed retirees said they were taking a more conservative approach to their retirement because of COVID-19. Given that many retirees already live conservatively, the finding added to the broader survey theme of retirees cutting back further and taking fewer financial risks during the pandemic.
10. Retirement expectations being downgraded
23% of retirees now had more negative expectations of their retirement due to COVID-19.
11. Wary of financial advice
23% of respondents sought financial advice, even though they were feeling less financially secure. Allianz Retire+ research consistently finds that retirees who used professional investment advice felt more confident in their financial position.
Some confidence has returned to markets over the last 5-6 weeks as vaccine rollouts appear to be close to happening. The U.S election result has also calmed investors some. It would be interesting to view the results of the survey if it were conducted today.
Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.