The Impact that Covid-19 Has Had on Retirement

The more we review how Covid-19 has impacted our lives, the more we can see the impact it has had on every aspect of our reality.

One area which was hugely highlighted by the pandemic is the world of workplace benefits. The necessity of legitimately beneficial benefits is now abundantly clear, with many people struggling without those forms of financial support.

Other than the health-related benefits which came under scrutiny last year, there is another area of benefits that are also seeing rapid change. Many people are now reconsidering their workplace retirement plan in light of the pandemic, with fears that their 401k or 403b plan may not cut it.

To further understand the impact that Covid has had on retirement, and what you can do to help as an employer, read on.

Out of Harm's Way

A natural reaction to an invisible threat like Covid-19, many boomers decided to retire early last year, roughly 10% more than the recent yearly average (source). While this can be largely attributed to the sheer amount of job losses during the pandemic, it’s also apparent that the risk of getting the Coronavirus has scared many out of their jobs early.

Retiring early is a luxury that many of these people will struggle to afford, with investment portfolios being considered one of the only ways to stretch out their funds. Hiring a financial advisor to talk to, or work with your employees on the verge of retirement can empower them to feel more secure.

Can’t Stop Won’t Stop

Conversely to the number of people retiring early, we have also seen an increase in the number of people delaying their retirement to accumulate more funds.

Many people have had their pension pots impacted by the pandemic and ensuing economic crisis. By planning to work a few more years, many believe they will be able to better equip themselves for their coming retirement.

A major concern for those people who are now planning on working longer is the increased risk of health problems in those later years. As an employer, you have the ability to equip your staff with an insurance plan that is more suitable for their situation.

You can also implement wellbeing programs to enhance the physical, mental, and financial health of your employees. This can help mitigate health problems that could cause financial collapse for those individuals.

Social (In)Security

With many people retiring early, we will also see an increase in dependence on social security. While this isn’t necessarily a bad thing in itself, for those people who are forced to file for social security immediately, they will be forced into a low-income bracket for the rest of their lives.

Whereas if the retiree is able to delay claiming social security until the full retirement age (66 and two months), they will receive the maximum benefit.

Any financial advice or assistance you can offer to your employees will help them to delay their need to claim for social security. It may also benefit them to have someone explain how social security works, so consider hiring a speaker or finding resources online.

Short-Term Gain, Long-Term Loss

Another understandable reaction to the Covid-19 pandemic has been an increase in employees making withdrawals from their 401k or 403b plan. While this may have been a necessity for many people, it’s hard to know just how this is going to impact their retirement plans down the line.

According to the aptly named report Retirement Insecurity 2021, 67% of Americans polled believe the nation faces a retirement crisis. While it may have begun already, the true effects of this may not be apparent until years from now.

Encouraging your staff to find other forms of financial support prior to withdrawing from their retirement funds is a must. You may be able to implement other workplace benefits which can assist your employees in their financial situation.

How Else Can You Help?

If you’ve made it this far, you clearly want to find ways to support your staff through their retirement, and we commend you for it. Here are some more ways you can help your staff prepare for their retirement:L

• Don’t reduce workplace retirement plan contributions
• Work with a Professional Employer Organization to find other benefits for your staff
• Implement integrated health and disability income insurance plans

If you have any questions about the best workplace retirement plan for your staff, or even yourself, then look for a Professional Employer Organization that you can trust. They will also be able to explain whether a 401k or a 403b plan is relevant to your business, and other nitty-gritty details.