A new report from Boston College’s Center for Retirement Research found the Covid-19 pandemic has had a minimal impact on retirement security nationwide, however the retirement challenges facing workers and municipalities prior to the pandemic continue to persist. The report’s conclusions echo the findings of Equable Institute’s State of Pensions 2020 December update.
According to the CRR report, the economic recession caused by the pandemic hasn’t affected retirement much because:
- Social Security checks still go out and its long-term financial outlook hasn’t significantly changed
- 401(k) contributions and balances seem relatively unaffected; and
- unemployment has not disproportionately hurt older workers.
Unfortunately, another reason why retirement security has not been impacted much by Covid-19 is that those with the least amount of resources have suffered the brunt of the economic recession.
As both Equable and CRR have pointed out, many of the problems confronting retirement systems before the Covid-19 pandemic still exist today. These problems include Social Security’s long-term deficit, inadequate 401(k) balances, and older workers struggling to find new jobs.
At the government level, state and municipalities will face increased pressure to fund their pensions due to decreased revenue brought on by reduced real interest rates, consumer spending, and reduced tax revenues.
When looking at how Covid-19 might impact retirement in the future, there are four trends to look out for:
- Will states pay less than the Actuarially determined contribution?
- Will legislatures pause previously approved automatic increased in necessary contributions?
- Will pension boards avoid appropriate reductions in investment returns to elude a near-term
increase in contribution rates?
- Will governments ask their employees to contribute more into pension funds?
Read the report: Covid-19 Is Not a Retirement Story