Thu, 28 January 2021 | pandemic women retirement
As the COVID-19 pandemic wears on, women investors are more concerned about their finances and feel less prepared than they've been in years. Nearly three in four (72%) women with investable assets of $100,000 or more said the pandemic has negatively impacted their ability to retire. These are among the latest findings from Nationwide's sixth annual Advisor Authority study, powered by the Nationwide Retirement Institute®, reflecting the responses of more than 2,500 individual investors, advisors and financial professionals.
Women investors in 2020 reported significantly higher levels of concern about a U.S. economic recession in the next 12 months than they did in 2019 (82% vs 60%) as well as greater concern about a bear market in the next 12 months than they did the prior year (74% vs 57%). Additionally, more than two-thirds of women (69%) believed that the COVID-19 pandemic would be the most likely cause of market volatility over the next 12 months. Four in ten women (40%) also cited the COVID-19 pandemic as the number-one macro factor that would most adversely impact their portfolio over the next 12 months.
"Women are concerned about the impact of the COVID-19 pandemic on their finances and the resulting uncertainty can make planning for the future—and their retirement—more difficult. For several consecutive years, our Advisor Authority study has revealed the disconnect between women's growing concerns about their ability to retire and their level of preparation—and the pandemic has taken this to new levels," said Ann Bair, SVP of Marketing for Nationwide Financial. "While women are acutely aware of the challenges they face, it's critical that they take steps now to address gaps in their retirement plan, especially as we start a new year."
Less Optimistic, More Concerned—and Less Prepared to Protect Assets
Given their concerns about the economy, the market and the impact of the pandemic, it follows that women investors were significantly less optimistic about their financial outlook in 2020 compared to 2019 (32% vs 56%). Likewise, men also cited a significant decline in optimism in 2020 (39% vs 53%).
Women were somewhat more likely than men to cite their biggest financial concern as losses in their portfolio related to the COVID-19 pandemic (36% vs 30%). In addition, even more women than men said that protecting assets was their top financial concern (36% vs 28%). In fact, the number of women who cited protecting assets as a top concern increased 10 percentage points in 2020, after steadily declining for the previous four years (2020: 36%, 2019: 26%, 2018: 28%, 2017: 30%, 2016: 32%).
Yet, despite greater concerns about losses to their portfolios and protecting their assets, findings revealed a preparation gap as women were somewhat less likely than men to have a strategy in place to protect their assets against market risk (60% vs 67%). Meanwhile, women were more than twice as likely as men to say they didn't know if they have a strategy (15% vs 7%).
Preparation Gap Persists When Protecting Retirement
The COVID-19 pandemic has disrupted women's retirement plans. Nearly three-fourths of women (72%) said the pandemic has had a negative impact on how long they could live off their retirement savings. Due to the pandemic, more than two in ten women investors (22%) said it's likely they would need to delay taking retirement income for the next 12 months and nearly one-quarter of women investors (24%) said they would need to reduce the amount of their retirement income withdrawals for the next 12 months.
Meanwhile, women are likely to live longer than men and are likely to face a retirement income shortfall. Over one third of women (39%) expect to need 20 years of income in retirement. Another third (35%) say they'll need 30 years or more. But only one in five women (20%) say they'll be able to live off their current retirement savings for more than 30 years
Yet, women were also less likely than men to say they have a strategy in place to protect themselves against outliving their savings (76% vs 84%) and five times more likely to say they didn't know if they have a strategy (11% vs 2%).
In addition, women were slightly less likely than men to cite saving enough for retirement as a top financial concern (16% vs 17%). Notably, the number of women who cited saving enough for retirement among their top financial concerns dropped eight percentage points this year compared to last year, after a slight decline over the prior four years (2020: 16%, 2019: 24%, 2018: 26%, 2017: 28%, 2016: 28%).
The news isn't all bad. For the first time since launching Advisor Authority, more than two-thirds of women reported that they worked with an advisor or financial professional—a nearly 10-point increase in 2020 over 2019 (67% vs 58%). Women with an advisor said the number-one reason they choose to work with a financial professional was to feel more confident in their financial future (35%). When markets are volatile, women with an advisor said the number-one benefit of working with a financial professional is to protect their assets against market risk (26%). Among women who did not have an advisor, 56% said it was because they prefer to manage their own assets.
The COVID-19 pandemic is driving the need for more guaranteed solutions to help women protect their financial futures. In fact, given the impact of the pandemic, nearly six in ten women (59%) said they'd feel more secure if a portion of their portfolio was invested in an annuity to protect against market risk and more than half (55%) said they would feel more secure if a portion of their portfolio was invested in an annuity to protect against outliving their savings.
Despite challenging markets, more than two-thirds of (67%) women and men said that they did not feel pressure to revise their investing strategy over the next 12 months. While women and men were most likely to protect against market risk using diversification (52% and 59%) and fixed annuities (39% and 34%), women were nearly twice as likely as men to say they used Fixed Indexed Annuities (26% vs 15%), while they were far less likely than men to use Registered Indexed Linked Annuities (3% vs 16%).
To help protect against outliving their savings, women and men were most likely to use Social Security (both 68%) and defined benefit plans/pensions (42% and 45%). However, women were somewhat less likely than men to use other guaranteed income solutions to protect against outliving savings, such as deferred income annuities (DIAs; 10% vs 12%), single premium immediate annuities (9% vs 16%) and qualified longevity annuity contracts (QLACs; 8% vs 11%).
Source: Nationwide