There were dozens of ways the coronavirus impacted finances in America. For a few weeks, it crushed the stock market. It wrecked employment figures around the country, and changed the way nearly everyone worked through the spring of 2020. It caused many investors to lose significant portions of their net worth, although some recovery is taking place as spring turns into summer.

And it probably frightened a great many retired investors, who are no longer in a position to add to their retirement income now that they are no longer working or earning a salary from employment.

The good news is that the harm done to the portfolios of retired investors apparently was not as drastic as originally feared.

Spectrem regularly addresses the issue of concerns over retirement income with investors, and finds that an overwhelming majority of retired investors feel they have enough income to last them through their retirement. And that optimism remains despite the hit many portfolios took as a result of the economic impact of the coronavirus.

An examination of the responses to the prompt “I fully expect to have sufficient income to live comfortably during retirement” over the past few years shows that more retired investors are feeling comfortable with their level of retirement income. That includes those who responded to the question in May of 2020, when the economy had just begun the process of recovery from the deep dive in the stock market and economic fortunes.

The questions are asked of investors with a net worth of at least $100,000 (not including the value of their primary residence.)

Going back to 2013, when the nation was just beginning to feel at ease about financial prospects following the Great Recession of 2008, 81 percent of retired investors responded positively to the prompt about optimism toward their retirement income. That was in stark contrast to the 62 percent of working investors who felt that way.

That percentage remained steady through the next few years. In the spring of 2017, 82 percent of retired investors were positive they had the retirement income necessary to live comfortably in their later years. The percentage of working investors in that position had improved greatly, up to 66 percent.

Throughout the Obama presidency and through the first three years of the first Donald Trump administration, the stock market rose with regularity, and 2019 saw several records set in terms of closing stock market totals. Despite a volatile market in 2019, a new Dow Jones Industrial Average record closing high was hit in January of 2020, and investors were feeling extraordinarily positive about their portfolios. In January of 2020, 87 percent of retired investors were certain they had the income necessary to live well through their retirement, and the percentage of working investors who felt that way climbed to 76 percent. It seemed as if every investor who invested in vehicles that would produce retirement income were pleased they had done so and certain they had built a sufficient retirement plan.

When the coronavirus struck, many of those same investors may have changed their mind, but it did not seem to strike the overall optimism of retired investors. While they may have seen their financial situation change for the worse in the first five months of 2020, 88 percent of retired investors said their retirement income was sufficient to live comfortably through their later years. That is the highest percentage ever recorded in response to the Spectrem prompt.

On the down side (and here is where advisors find their workload increase for the time being), only 65 percent of working investors feel their retirement income plan is sufficient for their post-work years. That may just be a reaction to current events without a serious discussion of current retirement income levels, but it is a matter advisors should consider when discussing the impact of the coronavirus with those investors who are still in the work place.

As far as retired investors go, it appears their plans (much of which came to be with the recommendations from a financial advisor), have worked to perfection. Planning for retirement is an idea that is still valuable, and the value is redeemed when the employed investor becomes the retired investor.

 

 

©Spectrem 2020

Keywords: retirement, income, investors, advisors, Spectrem, coronavirus, impact