While they may not be fully formed or clearly defined, most of us in our late 50s or 60s foster retirement dreams. We may envision an endless adult summer camp of fun in the sun or continued work at a personal passion. We might hope to share in the rearing of grandchildren or serve our community. We might crave international travel, a RV tour of national parks, or a pastoral life in a scenic home. We may just want a little more than rest. Or a lot more rest.
Regardless of our retirement dreams, the COVID-19 pandemic and its economic consequences have been a global nightmare. In addition to incalculable pain and loss for too many people, we have been forced to change the way we work and go to school, the people with whom we interact and the places we visit, how we manage our money, and what we can expect in the present and near-term future. The pandemic also has forced us to re-think or re-calibrate our retirement dreams. This post recounts some of the things we may want to consider as we re-calibrate our retirement plans and suggests there may be some positive lessons to be learned from how we are navigating this pandemic.
The Post-Pandemic Economics of Retirement
Tens of millions lost their jobs after mid-March 2020 and found themselves living on unemployment benefits with no hope of saving more for retirement.1 As of this writing, at least 100,000 small businesses have disappeared after losing the accumulated value their owners were counting on as a retirement nest egg.2 Some Americans have been forced to use new flexibility provided by Congress to withdraw money from their retirement plans to pay today’s bills. As I discussed more fully in an earlier post on the Studio, those of us with retirement savings invested in stock markets, including pension plans, have seen those savings shrink amidst unprecedented market volatility. Even though the markets have partially recovered, our confidence in the economy has not.3 Most tragically, thousands of families have lost loved ones including, in some cases, family breadwinners and caregivers whose loss adds economic uncertainty to the deep pain and trauma.
For retirement savers who will work for another decade or more, there is time for markets to recover and for us to continue saving for our retirement dreams. But the economics of retirement have undeniably gotten worse for millions of other Americans, including those planning to retire in the next few months or years. Reduced savings and potentially lower incomes because of the loss of a family member or a lower wage in the first job after unemployment could mean less retirement income. Extreme market volatility may cause risk-averse retirement planners to shift their savings into safer investments with lower long-term returns, which also could mean less income in retirement. In turn, these new economic circumstances could force millions of Americans to downsize their retirement dreams, or even to postpone them and continue working to earn back the retirement savings and income they have lost, or to support themselves because they don’t have adequate savings. For these Americans and others, the pandemic and economic downturn have been difficult to bear and will have lasting consequences.
Five Lessons the Pandemic Taught Us
For those of us fortunate enough to have some resources for retirement, the pandemic also has offered some valuable lessons. In the midst of the pain and loss, there have even been some positive lessons about re-calibrating our retirement dreams in a constructive, life affirming way. Allow me to suggest five such lessons:
1. Don’t just plan, live. One month, we were living our lives and hearing reports of a virus in Wuhan, China and Milan, Italy. The next month, we were working from home, if we were lucky, and unable to travel or even buy groceries and other necessities when we needed them. This pandemic reminded us that huge barriers to happiness can rise up without warning. We’ve also learned that Netflix is not a panacea. The better solution: seek and find happiness without delay. Travel to that city you’ve dreamed about seeing when it’s safe to get on an airplane. Visit the family member or friend you have been promising to visit for years. Go to that restaurant or show, hike or scuba dive, and experience the other things you’ve long considered, but always put off. Have that heart-to-heart conversation with a loved one that’s been on your mind for as long as you can remember. Simply, now and during your retirement, make yourself happy when it’s within your control, because the world has other plans.
2. Connections with family members and friends matter, a lot – Zoom and Skype video conferences can’t replace hugs or the connections that come only when we are together. Admittedly, some of us have chafed at too much togetherness with immediate family enforced by government stay-at-home orders. But many of us have yearned to be with other family and friends who connect with us in unique and important ways. You can build this lesson into your retirement plan. Specifically, factor it into your decision about where you should live in retirement. For example, you may want to live near those people who will provide the emotional and physical support you will need in retirement, especially as age makes your health and health care more of a factor, and traveling becomes increasingly difficult.
3. Love the place you live – To some extent, our comfort and happiness depend on our environment. That’s become clearer for those of us who have been staring at the same walls and furniture in our house or apartment for months. If you never felt certain about what you liked and didn’t like about your living space, you probably know what you like now. Many of us have already taken action to enjoy our environment more during our pandemic-driven isolation. For some, that meant adding plants, a pet, or a window-box spice garden. For others, a thorough clean out was needed. Some added exercise equipment or a beautiful garden, while others simply washed the windows. All this will be relevant to your retirement. As you age, your time at home is likely to increase even without another pandemic. Make sure that time is spent in a home environment that adds to your happiness, not your frustration.
4. Your workplace is an important social center – Either because of job loss or working from home, many of us have gotten a taste of life without daily interaction with co-workers. In a sense, it was a tryout for a defining aspect of retirement. For some, it was also a welcome relief. However, others realized the immense social and intellectual importance of our workplace communities. Remote work might seem appealing, but it also can be isolating. Lunchroom chats, hallway conversations, after-work drinks, and office drop-bys can bring emotional support, fun, intellectual stimulation, and even romance (consistent with the applicable laws and employer policies, of course). So, before you decide to stop working for good because your planned retirement date has arrived, remember back to this time and ask yourself how you will replace the good things you get from the workplace community you will leave behind.
5. Our basic health matters immensely – COVID-19 infected all kinds of people, but it posed the greatest risk to those with underlying health conditions, including emphysema, heart disease, and upper respiratory conditions. Of course, we don’t have perfect control over our health. Genetics and environment play important roles. Victim shaming people with health conditions serves no one’s interests. Nonetheless, as I discussed in an earlier post on the Studio, taking excellent care of ourselves with proper nutrition, moderate (or more) exercise, stress reduction, avoidance of smoking and immoderate drinking, and rich social intercourse can make our bodies and minds more resilient and help us live happier lives. That will be just as true in retirement as it has been during the pandemic. Your retirement plan should include a health plan that you will be able to sustain for a good long time.
Retirement is not necessarily top-of-mind for millions of Americans still struggling to address the economic and personal consequences of the COVID-19 pandemic. Those people have to survive today and tomorrow before they can even begin thinking about the future. Nonetheless, the worst situations can sometimes teach us important affirmative lessons about our lives and how we want to live them. This pandemic is one of those situations. For those of us who are able to plan for retirement, and learn those lessons, putting the lessons to their best use can make a meaningful contribution to a better life.
1. U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Weekly Claims, May, 2020.
2. Alexander W. Bartik et al., How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey, Working Paper 26989,Nat’l Bur. of Econ. Res., Apr. 2020.
3. John Leer, Analysis: COVID-19 Fears Hit Wall Street and Main Street, but Consumer Confidence Fell Faster, Morning Consult, May, 2020.