Please ensure Javascript is enabled for purposes of website accessibility

Even Wealthier Americans Are Pessimistic About Retirement Because of Coronavirus

By Maurie Backman – Aug 24, 2020 at 7:24AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A lot of people are adopting a more negative outlook on retirement during the pandemic. But you may not have to.

The COVID-19 crisis has changed the way Americans think about retirement -- and not necessarily in a good way. In fact, 70% of older Americans aged 56 to 75 report that the pandemic has made them more pessimistic about retirement, according to a survey by the Alliance for Lifetime Income of older. What's notable, though, is that all survey participants had a minimum of $100,000 in assets, which means we're talking about a sample set of potentially well-off individuals who are now rethinking their long-term plans. In fact, 3.2 million people have decided to delay retirement because of the impact of COVID-19.

But should you be worrying more about retirement in light of the ongoing crisis? Here are a few signs you may not have to.

Older man at desk with serious expression holding his head while on phone

Image source: Getty Images.

1. You have a healthy level of retirement savings already

There's no single savings target that guarantees you'll be financially secure during your senior years. But as a general rule, it's wise to end your career with about 10 times your ending salary in your 401(k) or IRA. If you're in your early 60s making $100,000 a year, you expect to retire in five years, and you already have $1.2 million to your name, then you may not need to worry about your retirement plans all that much. Sure, it pays to keep funding your nest egg, but in this scenario, you have a healthy amount of money socked away relative to your age and earnings, and that's something that should bring you peace of mind.

2. Your savings are invested appropriately given your age

The older you are, the more important it is to not invest your savings too aggressively. This doesn't mean you should dump your stocks as retirement nears. Rather, you should make sure to have a healthy mix of stocks and safer assets, like bonds, in your 401(k) or IRA. Now that exact mix will depend on your personal risk tolerance, but if you're 60 years old, you should generally have at least half of your portfolio in assets outside of stocks (namely, bonds and some cash). There's wiggle room with that breakdown, of course, but the point is that if your assets are allocated appropriately, you should feel better about sticking to your original retirement plans, because even if the stock market dives again in the coming months, it may not impact you too severely.

3. You have a backup plan for generating retirement income

Your retirement savings will likely be an important source of income for you later in life. But your 401(k) or IRA doesn't have to be your only income source. In addition to Social Security, you can look at other ways to produce income as a senior, like renting out part of your home or holding down a part-time job. Putting less pressure on your nest egg will put you in a better position to not have to stress about finances once your career comes to a close.

The fact that the COVID-19 pandemic is changing the way people view retirement is understandable. But if the above things apply to you, there's no need to take a negative view of retirement even though there's a major health crisis at play right now. On the other hand, if you're behind on savings, your assets aren't allocated properly, and you have no backup income stream for your later years whatsoever, then you may need to think about adjusting your retirement plans. That may not be the ideal thing to do, but as is the case with all things in life, the right attitude on your part could really work wonders in softening the blow.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.