A Tale of Two Pandemics: Younger Americans Feeling Financially at Risk while Retirees Emerge Resilient

Allianz Life study finds retirement concerns remain high for non-retired Americans, yet pandemic-induced fatigue has also caused poor financial decisions

Key findings:

  • 63% of non-retirees fear running out of money more than death, versus 46% of retired respondents
  • 68% of pre-retirees feel confident about being able to financially support their future goals, down from 75% in 2021
  • 42% of retirees said they retired earlier than expected, down from 68% in 2021; fewer did so due to healthcare issues (26% down from 33% in 2021) or unexpected job loss (15% down from 22% in 2021)
  • 54% of non-retirees admitted to spending too much money on non-necessities during the pandemic

MINNEAPOLIS – April 4, 2022 – As the United States passes the two-year mark of the COVID-19 pandemic, it’s becoming increasingly clear that there is a significant gap in the financial experience of younger Americans and their retired counterparts. Nearly two-thirds (63%) of non-retirees said they fear running out of money more than death, versus less than half (46%) of retired respondents, according to the new 2022 Retirement Risk Readiness Study* from Allianz Life Insurance Company of North America (Allianz Life).

Americans who have yet to retire and are still balancing careers, family and saving are feeling more worried about their financial future than they did at this point last year, and are significantly less confident than current retirees. This is particularly true for people who are 10 or more years from retirement – pre-retirees.

Fewer than seven in 10 (68%) pre-retirees said they feel confident in being able to financially support their future goals in the latest survey. This is down from 2021, when 75% of pre-retirees said they had confidence in financially supporting those goals. Meanwhile, 89% of retired respondents said they feel confident about funding their future financial goals.

Retired Americans are less worried than pre-retirees about a number of retirement concerns, including:

  • Having enough money to do all the things they want in retirement (28% versus 64% of pre-retirees)
  • The cost of living increasing and limiting their ability to afford necessities (33% versus 69% of pre-retirees)
  • Running out of money before they die (31% versus 65% of pre-retirees)

At the same time, retirees are more relaxed than they were last year about various retirement risks, including:

  • Market downturns (47%, down from 65% in 2021)
  • Healthcare costs (43%, down from 73% in 2021)
  • The rising cost of living preventing them from enjoying retirement (41%, down from 59% in 2021).

While an ongoing Great Resignation makes the headlines, only 42% of retirees in the survey said they retired earlier than expected, down significantly from the 68% last year. Notably, fewer said they retired early due to unexpected issues and a higher percentage were able to retire on their own terms:

  • Healthcare issues (26%, down from 33% in 2021)
  • Unexpected job loss (15%, down from 22% in 2021)
  • Feeling financially ready (18%, up from 9% in 2021)
  • Wanting to have fun while they still can (12%, up from 7% in 2021)

“While it’s encouraging that many retired Americans were able to weather the financial storm caused by the pandemic, it’s equally concerning that so many pre-retirees did not escape unscathed,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “The reality is, financial aftershocks from the pandemic are still ongoing, so both groups need to make sure they are taking the necessary steps to mitigate risks to their retirement security.”

Pandemic frustrations causing financial fatigue

The 2022 Retirement Risk Readiness Study surveyed three categories of Americans to get different perspectives on retirement: pre-retirees (those 10 years or more from retirement); near-retirees (those within 10 years of retirement); and those who are already retired. In addition to highlighting the disparity in retirement confidence among Americans, the 2022 study identified how the pandemic has caused financial fatigue, potentially putting non-retirees’ financial future at risk.

During the pandemic, more than one-third (34%) of non-retired respondents said they took money out of investment accounts (401K, IRA) in favor of cash, and 39% said they reduced the amount of money they were putting into retirement accounts. More than half (54%) said they were spending too much money on non-necessities during the pandemic, with the majority saying they regret the decision.

Despite these actions, non-retired respondents do have a desire to improve their financial decision-making, particularly those who are further from retirement. Nearly half of pre-retirees (48%) said they would like to make a formal financial plan with a financial professional. The same amount said they are interested in purchasing a financial product that provides a guaranteed source of retirement income.

Great Resignation still in motion

Many Americans are considering a job change in the near future, which could have a severe impact on their retirement security.

More than one-quarter of pre-retirees said they are likely to take a new job this year, either with a new company (31%) or going into business for themselves (26%). Surprisingly, an even higher percentage of near-retirees are planning an employment change in 2022 (33% with a new company and 32% switching to self-employment).

As expected, these potential job changes come with a significant amount of worry related to both short-and long-term financial planning. Nearly six in 10 non-retired respondents said they are worried about how a change in employment will affect a number of spending/saving topics, including: paying for necessities like housing and food (57%); cutting back on non-essentials like entertainment (57%); reducing the amount they can save for retirement (60%); and completely stopping savings for retirement (56%).

“With the pandemic driving many Americans to consider a disruption to their current employment status, it’s important to remember how that can also have a significant effect on retirement planning far into the future,” said LaVigne. “During these periods of uncertainty, it can be beneficial to work with a financial professional so you can make sure all of the bases are covered before making any drastic changes.”

Inflation concerns persist

One concern that continues to plague both retired and non-retired Americans is how rising costs will affect their finances. Nearly eight in 10 (78%) expect inflation to get worse over the next 12 months. About six in 10 people (59%) who are still in the workforce said their income is not keeping up with the rising cost of living, and 40% of retirees said their retirement income is not keeping pace.

Non-retirees are particularly concerned about inflation affecting their ability to pay for necessities (57%), save as much for retirement as they should (66%), and make the retirement lifestyle they envisioned unobtainable (61%).

Although only about half (52%) of retirees said they have a plan to address the rising cost of living in retirement, non-retired Americans are feeling the most pain. In order to address these challenges, non-retirees noted they have done or expect to do the following:

  • Find a job that pays more – 53%
  • Reduce spending on necessities – 52%
  • Dip into savings to make ends meet – 49%
  • Stop or reduce education savings (among those with children) – 52%
  • Stop or reduce retirement savings – 45%

“Regardless of whether they are retired or still in the workforce, all Americans are challenged by inflation right now and need to develop strategies that ensure their income keeps up with rising costs,” added LaVigne. “While changes to spending habits can help in the short term, it’s important that people take measured steps, such as adding a source of guaranteed income that can help to protect their finances without sacrificing retirement security.”

*Allianz Life conducted an online survey, the 2022 Retirement Risk Readiness Study, in February 2022 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America, one of the Ethisphere World’s Most Ethical Companies®, has been trusted since 1896 to help millions of Americans prepare for financial uncertainties and retirement with a variety of innovative risk management solutions. In 2023, Allianz Life provided additional value to its policyholders via distributions of more than $13.73 billion. As a leading provider of fixed index annuities, registered index-linked annuities, and fixed index universal life insurance, Allianz Life is part of Allianz SE, a global leader in the financial services industry with approximately 157,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.