The pandemic’s effects on wealth and retirement milestones

Amy Fontinelle

By Amy Fontinelle
Amy Fontinelle is a personal finance writer focusing on budgeting, credit cards, mortgages, real estate, investing, and other topics.
Posted on Feb 17, 2022

Pre-pandemic, your retirement goals may have included leaving the workforce after reaching age 65 or so. Or, you may have thought about working beyond the traditional retirement age because you enjoyed your job or needed to supplement your Social Security income.

No matter which scenario fits you, the uncomfortable truth is that the world is a different place than most of us dreamed it would be before the pandemic hit. You may be feeling uncertain about the future and feel that your retirement plans and goals have been upended. If so, you’re in good company.

A lot has changed with wealth accumulation and retirement expectations over the past two years, though these changes have affected some people more than others. Here’s a summary of these shifts and the effects they might have on reaching and enjoying one of life’s biggest milestones.

Retirement planning has changed

Before the pandemic, people were planning to retire at an older age than they are now. In November 2021, fewer than half of surveyed Americans said they were likely to work past age 62, and only 31 percent said they were likely to work past 67, according to the Federal Reserve Bank of New York’s Labor Market Survey. These numbers are the lowest since the survey introduced this question in March 2014.

While the survey doesn’t report on the reasons for people’s answers, possibilities include layoffs, burnout, and changes in health and priorities. A Pew Research Center study found that more adults age 55 and older are now retired because of the pandemic. (Related: Retiring early? Possible ways to tap savings and sidestep penalties)

Some older individuals who lost their jobs decided to retire rather than search for a new job during the pandemic. For those with large investments in the S&P 500, a soaring stock market may have made that decision easier. Keep in mind that retiring earlier makes longevity planning extra important if you’re in good health. (Retirement Planning Calculator)

Lost opportunities to save

Many people who are nowhere near retirement lost work during the pandemic, too. If you were part of that group, you may have lost ground on saving for the future. You may have stagnated or moved further away from your goals, including how much to have saved by certain milestone birthdays. (See: Retirement savings in your 30s: How much should you have saved?)

If you’re a parent, you may have had trouble working effectively during school and day care closures. Those who had to reduce their hours or leave their jobs to provide child care and home schooling may have missed out on the chance to contribute as much to their retirement accounts in 2020 and 2021 as they would have liked.

Maybe you missed time in the workforce because you caught COVID-19 or needed to care for someone else who was sick. Many families have lost loved ones who were also breadwinners and support systems, causing a drop in income and an increase in responsibilities. (Related: 6 signs you may be underinsured)

And a small percentage of people who contracted COVID-19 have struggled with extreme exhaustion, heart problems, and other serious impairments that have prevented them from working at the same capacity they had before their illness.

All these pandemic-related setbacks and devastations have impacted millions of people’s ability to maintain and increase their savings. You may be feeling behind, but you’re truly standing shoulder-to-shoulder with multitudes.

Market opportunity and cost savings

But it hasn’t been all about setbacks. For some households, the pandemic created new opportunities to increase wealth. People who already held stocks enjoyed a huge boost to their portfolios (at least on paper).

That’s because the stock market excelled during the pandemic. Indeed, the S&P 500 Index, often viewed as an indicator of overall market performance, returned 18.4 percent in 2020 and 28.7 percent in 2021.

Unfortunately, market gains aren’t shared across the board as only a little more than half of Americans own stock, according to Gallup. And ownership is highly correlated with income.

“Households with individuals and couples ages 35 to 45 and an earned income under $100,000 typically have the most skepticism about the marketplace,” said Jose L. Novoa, an advisory associate with Madan+Associates. He said these clients prefer to hold more cash, even in today’s relatively high-inflation environment. While they do have long-term goals, they’re more focused on present security and immediate needs, and less able to think about long-term investment and retirement strategies.

Higher-earning households have a different perspective, he noted.

“Households with individuals and couples ages 35 to 45 and an earned income of $150,000 or more generally have not made any major changes to their future goals,” Novoa said of his experience advising his clients during the pandemic.

“They continue to contribute to their traditional brokerage accounts, retirement accounts, and regular savings,” he added. “They’re concerned about outpacing inflation and limiting their tax liability as their wealth accumulates.” (Related: How to grow wealth)

Additionally, these types of households skew more toward knowledge-based work rather than face-to-face or location-based work. That meant they were more able to take advantage of remote work opportunities, which likely reduced their commuting expenses.

The rise of remote work also enabled people to move wherever they wanted – or to get new jobs without moving. No longer tied to big cities with high costs of living, people were able to become homeowners in more distant suburbs and smaller cities and towns. For some, retaining big-city earnings while reducing ongoing expenses created the opportunity to save more.

Retirement planning is still changing

Inflation is always a factor in retirement planning, but until the fall of 2021, it may not have seemed like a serious threat. The last time Americans experienced annual inflation above 3 percent was in 1993. Now, retirees and future retirees must reevaluate what their asset allocation and drawdown strategies should look like if above-average inflation, like the 7 percent we saw in 2021, continues.

The pandemic has also affected many workers’ and retirees’ expectations about their chances of living comfortably throughout retirement. Three in 10 workers said that they had been less able to save for retirement because of lost hours, reduced income, or job changes, according to the Retirement Confidence Survey conducted in late January 2021 by the Employee Benefit Research Institute. Some workers and retirees feel the same or more confident about retirement. But a third of workers and a quarter of retirees feel significantly less confident.

Planning for longevity and long-term care has become increasingly important over the last several decades as life spans have increased. However, in 2020, Americans’ life expectancy at birth dropped by 1.8 years, the Centers for Disease Control and Prevention reported in December 2021. Men’s life expectancy decreased more than women’s: 2.1 years vs. 1.5 years. COVID-19 became the third-leading cause of death, after heart disease and cancer.

Despite changes in average life expectancy, individuals and couples will want to continue basing their long-term plans on their own circumstances. Long-term portfolio strategies, life insurance, and long-term care insurance remain crucial considerations. (See: Is paying for long-term care part of your retirement plan?)

Planning for flexibility amid uncertainty

The pandemic has made it extra challenging to predict things like when we’ll retire, how long we’ll live, and how we should structure our portfolios. It’s also underscored that we can’t prepare for everything: Risks can pop up that were never on our radars. We must do our best to prepare for a variety of scenarios — and seek out a trusted financial professional when we need help.

Discover more from MassMutual…

Retirement savings goals for your 50s

3 uncomfortable truths about retirement

5 reasons why you may need an annuity


The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.