Transamerica, Covid-19 and That Finance Transformation
By Michael Hodin
As we try to understand and address Covid-19’s enormous economic disruptions, a timely report from Transamerica Center for Retirement Studies, Retirement Security Amid COVID-19: The Outlook of Three Generations, provides much-needed insights on the impacts to Americans’ finances and long-term plans. It examines how this crisis has already shifted the overall landscape for financial wellness, as well as the solutions people need to weather Covid-19 and prepare for the future.
This is the 20th year of Transamerica’s long-running annual survey — and it has perhaps never been more important. The results show Covid-19’s wide-reaching effects: nearly one-quarter of all workers and one-third of Baby Boomers say confidence in their ability to retire has declined. Fifty-eight percent of workers have experienced an impact to their job, 22 percent are withdrawing from their retirement savings early, and 29 percent have less than $5,000 in emergency savings. And this may be just the beginning of Covid-19’s economic toll.
Faced with these challenges, it’s more urgent than ever to transform how we work, save, invest, and spend across our lives. Even before the pandemic, the rise of longevity was transforming our 20th-century model that assumed retirement — full stop — at 60 or 65. Now, it’s even more imperative to evolve towards a 21st-century model in which older people extend their careers, launch second careers, and work in new, more flexible ways for longer. Fiscal sustainability, indeed economic growth, depends on a new approach to work and retirement in a time when there are more old than young and we inexorably move to 2 billion of us over 60 by mid-century. The earlier retirement model has been understood to be unsustainable as we prepare for the Decade of Healthy Ageing; now even more so in light of the profound impact of Covid-19.
As we look ahead, the report from Transamerica — part of Aegon, which also has a global survey on similar topics — indicates several key needs to help both older and younger people navigate the pandemic and its aftermath:
· Rethink outdated norms about work and retirement. The financial impact of Covid-19, especially for those nearing “retirement age,” highlights the obsolescence of a model where work ends in our 60s or younger. Indeed, more than half of workers in the Transamerica survey plan to work past 65, citing the desire to earn income (51% of those who plan to keep working), stay active (50%), and keep their brain alert (40%). As people live longer — the 100 year life is now in sight as the norm — they need new models that provide job opportunities and ongoing income in later decades.
· Provide all generations with the information and tools for lifelong financial wellness. As workers look to protect and rebuild their financial wellness in the wake of Covid-19, they are eager for practical knowledge and innovative solutions. Transamerica teaches us that the vast majority say they value benefits like a 401(k) or similar plan, participate when offered a plan, find automatic enrollment and auto-escalation appealing, and want more education and advice. By providing these tools, financial services companies and their employer customers can empower workers to take control of their financial wellness, withstand the current crisis, and prepare for the future.
· Support healthy aging as a financial solution. Covid-19 has vividly illustrated the link between physical and financial health. It’s no surprise, then, that health issues rank at the top of workers’ later-life concerns, as 34% fear declining health that requires long-term care, 29% fear long-term care costs, and 28% fear cognitive decline and Alzheimer’s. Therefore, embracing a healthy, active lifestyle that supports wellness and mitigates conditions of aging should be considered an important financial habit, just like starting to save early in life. Integrating health planning with financial planning is now clearly with us.
· Scale innovative, efficient care and caregiver support. It’s also worth noting the report’s section on caregivers, especially in light of the extra stress on this population due to Covid-19. Transamerica finds 35% of workers have had to balance caregiving at some point during their careers, and, among that group, fully 87% made a work change like reducing hours, using vacation days, or missing work outright. These findings underscore the need for supportive policies and resources, as well as efficient, professional elder home care, to help all of us manage the burden.
As Transamerica’s report shows, if our approach to work and financial wellness was undergoing dramatic shifts before Covid-19, there is now an even greater need for practical, innovative solutions. Together, workers, employers, financial services companies, and policymakers can develop and implement new strategies that address the financial challenges brought by this crisis.
But to be effective, these strategies must start with an updated understanding of longevity and its implications for workers’ expectations, priorities, and lifetime financial needs. Three cheers for Transamerica and their Aegon parent for their willingness and courage to address these core issues even as we continue to work our way through the pandemic.
