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Workforce emerging from the pandemic

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Workforce Emerging From the Pandemic

Al Waller: People in the workforce during the COVID-19 pandemic have seen nearly every aspect of their lives upended. They have had to contend with concerns ranging from physical and mental health to employment and finances.

Welcome back to ClearPath – Your Roadmap to Health and Wealth SM. I’m your host, Al Waller. With me is Catherine Collinson, CEO and president of nonprofit Transamerica Institute®. Catherine will be sharing findings from her team’s recent survey of people in the workforce and how they are faring. This podcast is a follow-up to our recent conversation on “Redefining Life Priorities in the Pandemic.”

Before we get started – a reminder that we would love to hear from you and learn what topics you would like us to cover. Please drop me or Catherine a note at [email protected].

Catherine, great to have you back.

Catherine Collinson: It’s great to be back.

Al Waller: Catherine, your report, Emerging From the COVID-19 Pandemic: The Retirement Outlook of the Workforce, compares people who are unemployed but looking for work, self-employed workers, and employed workers, a.k.a. people who work for others. Let’s start with people who were unemployed but looking for work, specifically their financial situation – what about this group stood out to you?

Catherine Collinson: As you can imagine, unemployed workers face formidable challenges, and many are struggling. Six in 10 indicate they have trouble making ends meet. Forty-four percent have no emergency savings. And, at risk of stating the obvious, without a paycheck or access to employer-sponsored benefits, they may find it impossible to save. Their retirement savings in all household accounts is just $200 – that’s the estimated median.

In addition to their challenging financial situation, our survey also found that two-thirds are concerned about their physical and mental health (both 67%), which makes things that much more difficult for them.

Al Waller: That's a real heavy state to be in, but I can't really say those results are completely surprising. But I am curious, did these job seekers lose their jobs because of the pandemic?

Catherine Collinson: Slightly more than half (54 percent) became unemployed during the pandemic. The others were either unemployed prior to the pandemic or had never been fully employed (36 percent and 10 percent, respectively).

In thinking about their retirement prospects, the most important first step for the unemployed is to regain their financial footing – the best way for them to do that is through meaningful employment.

Al Waller: Hopefully, the recent uptick in hiring is working in their favor.

As we have discussed many times on this podcast, those seeking employment should really consider the importance of retirement benefits as part of their compensation package and negotiations.

The other two groups from your survey are self-employed workers and people who are employed by others. What sort of “light” can you shed on self-employed workers for us?

Catherine Collinson: There's some definite upsides to being self-employed. Self-employment can bring freedom, autonomy, and importantly it can bring flexibility. However, it also often comes without a steady paycheck or access to employer sponsored retirement benefits.

Al Waller: Good point. How have the self-employed been negatively impacted by the pandemic?

Catherine Collinson: The pandemic has been challenging for many self-employed workers. Thirty-four percent indicate their financial situation worsened – and 35 percent were unemployed at some point during the pandemic.

Al Waller: I can’t imagine this bodes well for this group’s future retirement prospects. So, I’m hoping there’s an upside here, right?

Catherine Collinson: As we've talked about on the show, saving and planning for a secure retirement is a tall mountain to climb for everyone, and any employment setbacks or setbacks to our income can make it that much more difficult. The self-employed, however, have a somewhat unique view of retirement that differs from employed workers in that many genuinely love what they do. So, the whole idea of retirement actually seems to be a little less relevant for them. Why give up something you love just because you reach a certain age?

And what we see in the survey is the self-employed are envisioning long and financially productive lives. Let me give you a few examples. 17 percent of the self-employed plan to live to age 100 or older. They enjoy working. 63 percent expect to retire after age 65 or simply do not plan to retire, and almost as many, 62 percent, plan to continue working even in retirement.

However, being self-employed often means they don't have access to employer sponsored retirement benefits. What this means is, the self-employed have to take a do-it-yourself approach to saving for retirement. Some good news is that many are.

Our survey found that 68 percent are indeed saving for retirement. Our survey also uncovered an opportunity for the self-employed. While the good news is that so many are saving, our survey finds that they may not be taking full advantage of certain types of tax-advantaged retirement accounts that are available to them – for example, solo 401(k)s, SIMPLE IRAs, and SEP-IRAs.

Al Waller: Great intel. I want to mention that the IRS has a whole section on its website, irs.gov, about those different types of retirement plans.

Let’s move on to the last group your study researched – people who are employed by others. What can you tell us here?

Catherine Collinson: This group has had fewer setbacks during the pandemic. Of the 3 groups that we're talking about – the unemployed but looking for work, self-employed, and employed – workers who are employed by others have been less likely to experience setbacks than unemployed workers, for example, or even self-employed. However, it hasn’t been a complete walk in the park for them either. Of the 3 groups we’re talking about, employed workers are most likely to say their financial situation has stayed the same, with almost two-thirds indicating this. And that's good news – that the financial situation has stayed the same.

However, as I mentioned, they too have experienced difficulties. 38 percent experienced one or more negative employment impacts, such as reduced hours, reduced pay, or being furloughed. 28 percent indicate they were unemployed at some point during the pandemic.

Al Waller: What did you learn about retirement savings? How are they faring in that department?

Catherine Collinson: With greater access to employer sponsored retirement benefits such as 401(k)s and similar plans, employed workers are generally better positioned to save and invest for retirement.

Our survey found, 79 percent of employed workers are currently saving, either in an employer sponsored plan and/or outside of work. It's important to note not all employed workers have access to an employer sponsored retirement plan and among all workers, many may be inadequately saving. The total estimated savings in all household retirement accounts among employed workers is $65,000. That's the estimated median.

Al Waller: It sounds like we could all be doing a better job to improve our financial security in retirement. What suggestions do you have for us?

Catherine Collinson: I’d like to share four tips.

The first tip is engage in financial planning to gain a full understanding of your situation. This involves creating a budget, prioritizing expenses, setting short and long-term goals, and importantly – doing your homework and learning about investing. Your planning should also include calculating your retirement savings needs and creating a written retirement strategy.

For many people, this may sound overwhelming, daunting, or just downright tedious. However, this is more than a mathematical exercise. It is an invitation to envision your life's goals, your dreams, and how to financially make them a reality.

Al Waller: I really like the way you frame this. I think the tendency is for some folks to play like an ostrich and put their head in the sand…and deal with it tomorrow. Now, what’s next?

Catherine Collinson: One of the major lessons learned in the pandemic is the importance of emergency savings. So, my second tip is to save for emergencies and evaluate your insurance needs to help protect yourself and your family in the event of a major financial setback, which could be anything from healthcare expenses to major home repairs or even unemployment.

Al Waller: Isn't that the truth? It is funny – I remember back in the day, my wife referring to that $250 monthly surprise expense that would inevitably pop up when you least expected it…and probably at the worst time too. By the way, I think that figure over the years has probably gone up. Now, let's talk about the savings for retirement.

Catherine Collinson: I know it can be difficult when people have competing financial priorities, especially in these uncertain and inflationary times. This is where a financial plan can come in handy to help you balance short-term needs and long-term priorities and inform your decision-making.

My third tip is if you have access to a 401(k) or similar plan at work, save in the plan and take advantage of any matching contributions. For self-employed workers, who are not offered a plan, explore contributing to an IRA or other tax-advantaged plan like those I mentioned earlier. As a reminder for unemployed workers and job seekers, it is important to consider retirement benefits as part of your total compensation package when evaluating employment opportunities.

Al Waller: I couldn’t agree more, which leads us to your fourth and final tip.

Catherine Collinson: The fourth and final tip is to review your retirement savings portfolio to ensure investments are consistent with your risk profile and years to retirement. The markets have been volatile recently and you may need to realign your investments. Seek assistance from your retirement plan provider or consider consulting a professional financial advisor if needed.

Al Waller: Good counsel and great research, Catherine. We’ve done a deep dive into your recent survey report. Where can listeners learn more?

Catherine Collinson: You can find the report and more information on Transamerica Institute’s website, www.transamericainstitute.org.

Al Waller: Catherine, thank you for sharing these insights.

As we wrap things up, I’d like to remind everyone of our recent podcast on how workers are “Redefining Life Priorities in the Pandemic.” 

If you have ideas for future episodes, comments, or feedback, please email me or Catherine at [email protected].

Until the next time, I’m your host Al Waller. Stay safe, be well and thanks for listening.

ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s website and mobile app, wherever you get your podcasts, and at transamericainstitute.org.

ClearPath – Your Roadmap to Health & Wealth is produced by the Transamerica Institute with assistance from WYPR.

The information provided here is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance.