Javascript is not enabled.

Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.

Skip to content
Content starts here
Leaving Website

You are now leaving and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.

Pandemic Puts Secure Retirement at Greater Risk for Many Older Americans

AARP calls for changes aimed at supporting retirement savers and retirees

spinner image News about the economic impact of coronavirus is shown in a montage of headlines, the Capitol dome and money
iStock / Getty Images

The COVID-19 pandemic has had an outsize effect on people 50 and older: Not only did it impact older adults’ health more severely than younger ones, but it also forced many into early retirement and prompted others to take withdrawals from their savings earlier than they had planned.

“So many of our members saw loss of employment,” AARP CEO Jo Ann Jenkins said August 18 on Washington Post Live. “We know that if you're 65 and older and lost your employment, you are more likely to be unemployed for six months or longer, and likely to take more than three times longer than others to get reemployed.” 

spinner image Image Alt Attribute

AARP Membership

Join AARP for $12 for your first year when you sign up for Automatic Renewal. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP The Magazine

Join Now

The pandemic effect on older Americans

The national unemployment rate climbed from 3.5 percent in February 2020 to 14.7 percent in April. It has since fallen to 5.9 percent. But 55.3 percent of the long-term unemployed — those who have been looking for work for 27 weeks or more — are age 55 or older.

As a result, many workers had to tap their retirement savings, or stop saving for retirement, to make ends meet. According to a June 2020 survey by TD Ameritrade, 23 percent of respondents ages 55 to 73 have retired early, or considered retiring early, because of the pandemic. Nearly one in four adults ages 25 and older surveyed by AARP in April 2021 dipped into their retirement savings or stopped contributing to their retirement accounts during the height of the pandemic.

"Earlier retirements and emergency withdrawals from retirement accounts will likely prevent these workers from accumulating additional years of wages and savings, resulting in reduced pensions and lower monthly Social Security benefits for life, as well as the need to spend down their retirement savings earlier than anticipated,” David Certner, legislative counsel and director of legislative policy for government affairs at AARP, told the Senate Committee on Finance on July 28.

Age discrimination played a role in the pandemic’s impact on older workers. “We have certainly seen an uptick in the amount of age discrimination,” Jenkins said. “We think that we should all be able to work for as long as we choose, free from discrimination. People who are engaged in work, whether in paid work or volunteer work, live some seven to eight years longer than those who don't. It's so important for employers to look at this new workforce with the idea of having four to five generations in the workplace at one time."

spinner image membership-card-w-shadow-192x134

Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP The Magazine.

The retirement gap

Traditionally, retirement preparedness consisted of three parts: savings, employer-paid pension income and Social Security. But traditional pensions, also known as “defined benefit plans,” are vanishing for many workers. In 1983, roughly 60 percent of workers with an employer-sponsored retirement plan had a traditional pension plan; by 2020, just 18 percent of full-time private-sector workers had access to a traditional pension.

Employers have largely replaced traditional pension plans with what are called “defined contribution plans,” such as 401(k) plans, whose value at retirement depends on the amount the employee and employer contribute, as well as investment returns and the employee's skill at managing money. In 1983, among workers who were offered a retirement plan, just 12 percent were offered only a defined contribution plan. By 2020, 73 percent of those workers who were offered a workplace retirement plan were offered only a defined contribution plan.

See more Health & Wellness offers >

Over half of all workers don't have access to any retirement plan at work. Most workers who do have access to a workplace savings plan are not saving enough to adequately fund a secure retirement. For middle-income households ages 55 to 64 with a defined contribution plan or IRA, the median balance is roughly $144,000, not nearly enough to ensure a secure retirement, especially given that the average number of retirement years has increased markedly, from 12 in the 1960s to almost 20 today.

Retirement solutions for workers

Because so many workers don't have a retirement plan available to them, AARP is a strong supporter of state-backed “work and save” programs, which are state-facilitated payroll deduction programs for those whose employers don't offer a retirement plan. “Workers are 15 times more likely to save for retirement simply by having access to payroll deduction at work,” Certner said. “Work and save” programs require employers to facilitate payroll deductions for workers, but the programs operate like 529 college savings plans and are operated through public-private partnerships. Worker participation is optional, and investment decisions are left to the worker.

Ultimately, state “work and save” programs could save the government billions of dollars in costs related to those with little or no savings. “The U.S. could save an estimated $33 billion on public assistance programs between 2018 and 2032 if lower-income retirees save enough to increase their retirement income by just $1,000 more per year,” Certner said.

spinner image membership-card-w-shadow-192x134

Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP The Magazine.

AARP also supports federal legislation that would encourage automatic payroll deduction savings for all workers who lack coverage. In addition, AARP supports improvements to the Savers’ Tax Credit — which acts as a matching contribution — to encourage greater retirement savings, especially among more modest-income workers. AARP also supports improving retirement plan coverage for the 27 million part-time workers who typically aren't covered by retirement plans, as well as a national lost-and-found office to help workers locate retirement benefits from previous employers. In 2018 — the latest Department of Labor data available — there were 21.3 million inactive 401(k) accounts. AARP also strongly supports adequate plan disclosures, including an annual paper benefit statement, to help workers better understand and manage their retirement plans.

Finally, AARP is also a strong supporter of Social Security, whose modest benefits — an average $1,555 per month for all retired workers — keep approximately 15 million older Americans out of poverty and allow millions more to live their retirement years independently and without fear of outliving their income. “We are trying every day in all of our advocacy work to make sure that Congress and the White House understand how important Social Security is to our future security,” Jenkins said.

See more Health & Wellness offers >

John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger's Personal Finance and  USA Today and has written books on investing and the 2008 financial crisis. Waggoner's  USA Today investing column ran in dozens of newspapers for 25 years.

Discover AARP Members Only Access

Join AARP to Continue

Already a Member?

spinner image membership-card-w-shadow-192x134

Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP The Magazine.