The COVID-19 Pandemic and the Ongoing Impact on Retirement Planning for Americans

A recent study by the Indexed Annuity Leadership Council provides key insight into how many Americans are thinking and feeling about the ways the COVID-19 pandemic has affected retirement income planning, including securing lifetime income with annuities.

Annuities, Retirement and the Pandemic graphic

Indexed Annuity Leadership Council

The ongoing COVID-19 pandemic has put stress on all Americans, including those actively planning for retirement. Both health and financial concerns have created an environment of uncertainty, exacerbating a challenging retirement picture for Americans. 

Different age groups have been affected by economic and social changes since the beginning of the COVID-19 pandemic. In April 2020, the unemployment rate for workers age 65 or older peaked at 15.6 percent. This exceeded the rate of unemployment for those ages 25 to 54 by three percentage points, the largest gap between these groups ever recorded.1^R.W. Johnson, Urban Institute, "As Unemployment Surges, Older Workers Need More Help, May 2020." According to a study by the Indexed Annuity Leadership Council (IALC), “40 percent of Americans say they had to dip into their savings to cover daily expenses since the pandemic began and 15 percent said they had to dip into them ‘a lot.’"2^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021.

At the same time, the pandemic has launched a more comprehensive conversation about finances, saving money and how to retire comfortably. In the IALC’s survey of over 2,000 people, 35 percent said they have talked more about their finances since March 2020. Statistics by the IALC also suggest younger Americans are now interested in retirement products like annuities more than ever, with 77 percent likely to consider them.3^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021.

Key Retirement Planning Findings from the IALC Study 

One of the most important aspects of retirement planning throughout the pandemic has been protecting what’s already in place. Throughout different age groups, the IALC study highlights the worry some Americans have had about their current retirement savings. Seventy-six percent of Americans said protecting their savings from loss is important to them. Seventy-seven percent say it is important that they do not run out of income in retirement. The study also found that 86 percent of Americans now regard having guaranteed income in retirement as important.4^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021.

The pandemic also had a significant impact on the timing of retirement for many Americans. During the first quarter of 2020, the size of the retired population in the U.S. expanded beyond its normal trend by an additional 1.7 million people.5^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021. In turn, the IALC study revealed that the pandemic had delayed 30 percent of respondents’ plans to head into retirement, and 33 percent of those planning to retire within the next five years have also moved their original timeline. Forty-five percent acknowledge saving for the future is more of a concern since the pandemic, and 42 percent are worried about running out of money in retirement.6^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021. 

On a more positive note, current retirees, defined as those who retired between 5-10 years ago, have a high satisfaction rate when it comes to being comfortable financially. Almost 80 percent say their quality of life in retirement is satisfactory.7^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021. 

How Annuities Can Help Make a Difference in Retirement Income Planning, Despite the Pandemic

An annuity is a contract between you and an insurance company purchased in a lump sum or through a series of recurring premium payments. Annuities are sold by licensed insurance agents and are regulated by state departments of insurance. The annuity is backed by the financial strength and claims-paying ability of the issuing company.

The two most common categories are fixed annuities and variable annuities. These annuities have different methods of earning interest on the contract value. Variable annuities earn returns based on the performance of the investment portfolio. A return is not guaranteed and the contract value may go up or down.

However, according to the IALC, annuities can provide key benefits including:

  • A guaranteed income stream
  • Portfolio diversification
  • Principal protection
  • Potential tax-deferred growth 8^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021. 

Overall, 51 percent of Americans said they are now more likely to consider an annuity to shore up their retirement.9^Indexed Annuity Leadership Council, "Annuities, Retirement and the Pandemic", July 2021. 

A separate study by the National Institute on Retirement Security (NIRS) echoes those results and clearly illustrates annuities as more of an option due to its features surrounding guaranteed income. According to the NIRS, 54 percent of Americans agree they would use some of their savings to buy guaranteed monthly income.3^National Institute on Retirement Insecurity, "Retirement Insecurty 2021, Americans' Views of Retirement",  2021. 

While Social Security offers a safety net for most retirees, it may not offer enough money as a sole income source. A diversified portfolio, including different types of annuities, can help make a longer-term financial impact and also may mitigate the risk of declining income in retirement.

Today’s retirement objectives, which have been widely affected by COVID-19, remain a reliable income source that provides asset protection and stability amid historic uncertainty. Talk to a financial professional about retirement income options that can help keep retirement plans on track, reduce worry of outliving savings, and create a comfortable and satisfying lifestyle in retirement.



This content is for informational purposes only, and is not a recommendation to buy, sell, hold or rollover any asset. It does not take into account the specific financial circumstances, investment objectives, risk tolerance, or need of any specific person. In providing this information American Equity Investment Life Insurance Company is not acting as your fiduciary as defined by the Department of Labor. American Equity does not offer legal, investment or tax advice or make recommendations regarding insurance or investment products. Please consult a qualified professional. 
Annuities are long term vehicles designed for retirement income and are not suitable for everyone. They involve restrictions and charges, including possible surrender penalties for early withdrawals. Annuity distributions are subject to ordinary income taxes, and if taken before age 59-1/2 may incur an additional 10% federal penalty. Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC.