Tracking throughout the year has revealed ups and downs in people’s savings behavior and sentiment toward retirement investments. With 2020 coming to a close, CivicScience took a final look at where things stand and what the next year may bring.
Saving May Be Taking a Turn for the Worse
With job losses and financial upset, savings behavior—including putting money into retirement savings—has fluctuated throughout the year, albeit not as wildly as you might expect. In fact, saving as well as paying off debt is something that Americans seem to have been doing more of overall during the pandemic. (A May survey found that 39% of Americans said they saved their stimulus check.)
However, things may be changing. A CivicScience survey of U.S. adults shows a spike in those who are putting 0% of their income into savings and retirement savings, beginning in Q4. That’s coupled with a drop in those saving between 1-10% and a drop in those saving upwards of 11% per month.
On average, the majority of people are saving between 1-10% of their income, but close to one-quarter of people aren’t saving anything on a monthly basis and this bracket appears to be growing.
Is this the result of holiday spending? The CARES Act, letting working-age people pull money from retirement without penalty? Or fallout from job losses?
This recent decrease in savings coincides with an uptick starting in November among those not getting paid or working with reduced pay:
And it’s no surprise how job changes relate to savings. More than half of those who are saving 0% of their income each month are out of work and not getting paid. On the other hand, more than two-thirds of people who are saving between 1% and 5% of their income are working with reduced hours or pay.
Most People Don’t Feel Confident About Their Investments
You might have seen this one coming, long before the pandemic, in fact. Retirement savings insecurity, in particular, is nothing new. The year 2020 saw a drop in confidence at the start of the pandemic in March, most likely reflective of pandemic-induced anxiety coupled with layoffs and furloughs. Things have mostly leveled off since then, with 63% of people feeling that they don’t have enough money in investments and retirement savings, which is comparable to January 2020, pre-pandemic levels.
In fact, on a positive note, CivicScience tracking dating back to 2016 shows a larger percentage of people now have retirement funds in an IRA, 401K, or other type of fund, growing one percentage point year over year.
However, that still doesn’t change the fact that the majority of Americans today feel less than confident about the amount of money they have tied up in investments and retirement funds.
Some financial experts say that you should have 6 times your income saved by the time you hit 50 in order to retire. When it comes to retirement savings specifically (excluding other types of investments), the survey shows there are more adults (41%) between the ages of 18 and 54 who feel they aren’t saving enough today to retire comfortably than those who do (39%), with 35- to 54-year-olds feeling the least secure about their retirement funds.
What about Baby Boomers and those who are already retired? Nearly half (46%) of those 65 and older feel that they don’t have enough investments, including retirement. That number matches recent findings from the Transamerica Center for Retirement Studies, from surveys taken before the pandemic.
More concerning is the whopping 62% of Baby Boomers between 55 and 64 who feel they don’t have enough investments, including retirement.
Women in the 55+ crowd are more likely to feel they aren’t saving enough, and adult women of all ages are saving less of their income than men on average. (Read more on the gender savings gap.)
Expectations for the Future
Heading into 2021, the survey reveals some interesting trends when it comes to expectations for investments and retirement savings. After bottoming out in March, the majority of respondents (42%) expect to see their investments grow between now and six months down the road, and up-to-date tracking shows that this notion is continuing to rise.
On the other hand, 23% of people expect to see less investments in six months.
Unravelling the nuances hidden there, take politics and the election into consideration. Conservatives today are more likely to feel less hopeful about their near-future investments, whereas liberals and moderates are more likely to feel optimistic that investments will stay the same or grow. One month ago, that was the inverse.
Overall, sentiment towards retirement throughout the year hasn’t shifted dramatically, but retirement insecurity continues to remain the norm. The coronavirus pandemic hasn’t necessarily caused significant disruption among the majority of people’s retirement savings behavior, however we will keep watching to see if the recent decline in income savings will fall back or if this trajectory continues into 2021.
