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Pandemic Aftershocks: Mitigating risk to retirement savings and income

Americans fear the economic impact will be greater than the Great Recession, but … there is hope.

Since the market crash of 2008, many Americans continued to share the worry about a retirement crisis. Now, with the lingering effects of that not-so-distant memory, many people share a growing fear that the COVID-19 pandemic will have an even greater impact on the economy and personal finances than the 2007-2009 Great Recession.* While the full economic impact of the pandemic will not be known for some time, if you’re feeling  nervousness over financial security or unprepared for the risk of an early retirement, you’re not alone.

It’s clear that the financial security of Americans has been severely compromised, adding greater risk to a generation who were already struggling to save and plan for retirement. In our recent survey, a majority of Americans reported far greater anxiety today than after the Great Recession about many financial issues, including day-to-day finances, retirement savings, and the stability of their professional career. And, rightfully so: Things like an earlier-than-planned retirement or general lack of financial preparedness are realities that put savings and retirement income plans at risk.

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Retirement Risk: Unable to invest in or catch up on retirement savings goals. 

For many, financial constraints experienced during the pandemic have made it more difficult to set aside money planned for retirement savings contributions. For those already feeling behind, it may seem like retirement dreams are no longer a reality as daily living expenses put retirement savings on hold.
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Retirement Risk: Unprepared for an unexpected early retirement.

The trend toward an earlier-than-expected retirement continues to rise as Americans grapple with the many aspects of COVID-19. Increasingly, older individuals are being forced into early retirement due to reasons beyond their control, such as job loss or healthcare issues – this includes caring for themselves or their loved ones. While these are normally the top two reasons for unplanned early retirement, the pandemic has exacerbated those issues.

How can you mitigate these retirement risks? 

First, it’s important to believe that there is hope and help – it just may require some homework. If you are not already working with one, search for a financial professional who is well-versed in helping navigate unplanned situations. This should not be difficult. You’re likely finding that you’re paying a lot more attention to your saving and spending behaviors, which makes it an ideal time to check in with a financial professional to discuss the following:

  • Whether or not you’re saving enough, and ways to increase your savings growth potential
  • Ways to diversify your retirement savings to mitigate risk during times of increased market volatility
  • Any additional or unknown expenses or risks associated with your retirement
  • Determining the optimal time to claim your Social Security benefit
  • Whether an annuity that provides a guaranteed source of retirement income could fit your needs
  • How products like fixed index universal life insurance can provide a death benefit for beneficiaries as well as the potential to help supplemental retirement income through policy loans and withdrawls.1

Ultimately, working with a financial professional to formalize a retirement strategy can go a long way to alleviating the financial worry and burdens caused by the aftermath of the pandemic.

* The Allianz Life Retirement Risk Readiness Study was conducted by Allianz Life via an online survey in December 2020. The nationally representative sample included 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.

1 Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax.  Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed.  Tax laws are subject to change and you should consult a tax professional.

FIUL is not a source of guaranteed retirement income.

Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.