COVID-19, Retirement and the Future

By Anna M. Rappaport

Retirement Section News, May 2021


COVID-19 has been a dominant issue for many Americans through most of 2020, and it continues to be a dominant issue in the first quarter of 2021. The pandemic is raging and more and more people are getting infected with the concerning rapid spread of new variants. Vaccines have been approved for emergency use, but it looks like it will be at the least the middle of 2021 before enough of the population is vaccinated for herd immunity.  It could be much longer if there are ongoing vaccine shortages or if variants require boosters or different vaccines, for example.

The impacts of the pandemic have been such that, as of publication, more than 500,000 Americans have died, millions have been ill (some for a long time), many have been working from home for almost a year, others have lost jobs or been laid off, social distancing and masks are recommended and in some areas are required, in-person conferences have generally been cancelled or postponed, international travel is restricted, a great deal of routine health care has been delayed, and much more. While equity markets have done well since March 2020, there has been a dramatic increase in unemployment, housing and food insecurity over the last year, interest rates are low, and there is a lot of uncertainty. Some state and local governments are under a great deal of stress. Retirees, pre-retirees and retirement plan sponsors are all affected. Retirement plans have been affected as well. This article discusses how COVID has impacted retirement in many ways and includes thoughts about how the retirement system may need to adjust for the future as a result.

Impact on Retirees

COVID-19 has affected retirees and near-retirees in a number of different ways. The economic changes linked to COVID-19 will affect the retirement savings of many retirees and people nearing retirement. Retirees with defined benefit (DB) plans are less likely to have their economic security affected by the pandemic than those with defined contribution (DC) plans as their primary retirement plan. COVID-19 has changed the lives of most Americans and there are very important issues for retirees and near-retirees to consider. Such as:

  • Individuals who reach retirement age with less savings than they planned may try to delay retirement, and this will work out for some but not others. More retirees may try to continue to work and/or phase into retirement.
  • Some individuals will retire earlier than planned because of health concerns and/or a desire not to be exposed to the virus, or because of job-related issues or job loss.
  • Many people who are already retired will face less economic impact from COVID-19 than those still in the workforce. Social Security is the largest share of income for many retirees and this source has not been impacted. Retirees who do not need to sell assets to pay regular living expenses often are not affected much by short-term market fluctuations.
  • Social engagement is very important for retirees. Social engagement has been identified as one of three domains that are important for successful aging. COVID-19 has disrupted most traditional forms of social engagement, and it is likely that there will be continued disruption until there is widespread inoculation with vaccines. Technology-based social engagement, such as Zoom calls and social media groups, are a partial substitute for in-person encounters, but many do not have access to this technology.
  • COVID-19 has limited and in some cases cut-off access to family for retirees. Spending time with family is very important to many retirees, and for those who need help with a variety of chores or other activities, family is often the first and most important source of help. The importance of family connections to retirement success—financial and emotional—is often overlooked in planning. Two of the reports listed below deal with family issues and retirement.
  • Most retirees are in high-risk groups for COVID-19. This creates additional challenges for retirees living in senior housing and multi-generational households. It seems likely that more retirees may want to live in multi-generational households in the future, and that new housing designs and models may emerge.
  • Retirees needing regular support and wanting to live in a community with activities and social engagement opportunities can choose from among several types of senior housing options that include support. Such residences include independent living, assisted living, memory care units, and nursing homes, and communities offering multiple levels of support. These communities usually include communal dining. COVID-19 spreads rapidly in such communities and has been the cause of a significant proportion of deaths in such communities. Many such communities locked down for several months, and had either total or partial restrictions on visitors. In some, residents were not allowed to leave their rooms for months. In the future, more retirees may seek other support alternatives considering COVID-19 experiences. I expect innovation in the structure of these communities and support mechanisms.
  • COVID-19 disrupted the usual access to health care and support services for many retirees. As states reopened, there was less disruption, but retirees may remain reluctant to visit medical offices because of infection risk, and some medical offices may still limit seeing patients. As the pandemic increased in early 2021, elective surgeries were again stopped in some areas. Telemedicine grew rapidly and is expected to remain important.
  • Family help with medical care was also challenged. Many older individuals have had family members take them to the doctor and/or serve as health advocates, and this may have been disrupted. Where family or other support means that someone is visiting the home of the retiree, the retiree and support service need to decide whether they wish to continue the service prior to the delivery of a vaccine. There are challenges if anyone in the household of the caregiver or the person needing care has tested positive for the virus.
  • Losing a loved one or close friend has been more difficult than usual during the pandemic as funerals, gatherings to mourn, visits to support the survivors, church services and other events have been limited. This can be traumatic in some situations.
  • Active retirees often plan for substantial travel, volunteering at local not-for-profits, sports, going to the theatre, etc. Many of these activities stopped completely for several months, some for much longer, and some are likely to be shut down for a long while. As options reopen, retirees will need to decide which ones they wish to resume and when.

Impact on People Saving for Retirement

COVID-19 has also affected working age Americans as they try to save for retirement. We can think of the working age population as being on a spectrum. At one end are people who are very secure and generally saving well for retirement. At the other end, the financially fragile often have problems managing their finances month-to-month, have no emergency savings and are mostly likely to be affected by the economic fallout of the pandemic. I expect that there will be more focus on emergency savings in the future and greater recognition that people without emergency savings are unlikely to be able to save for retirement.

Results will be very different depending on what happens to employment-related income.  Retirement savings will generally be disrupted for households with job loss, layoffs, or a decline in income linked to work. For example, people in the restaurant industry are likely to have a significant decline in income even if they do not lose their jobs. In addition to being unable to save more, some will use existing savings, and even retirement savings, to meet their immediate needs or help others close to them who have problems. People who have the virus and need hospital care or substantial care at home may have trouble paying medical bills. 

Those who have lost jobs may find it difficult to find jobs again, and if they do, their earnings may be less. Job problems in the years nearing retirement often lead to substantial reductions in retirement resources. This issue was studied by the Society of Actuaries (SOA) in the 2019 Survey of Post-retirement Risks.

Many small business owners may view the value of their business as retirement savings, and may plan to sell the business to help finance retirement. The pandemic led to many small business failures and others losing significant value.

Impact on Retirement Plan Sponsors and Retirement Plans

Employers’ immediate responses to COVID-19 were strongly influenced by the shutdown, the economy, the ability of workers to work from home where feasible, and keeping employees safe. There were winners and losers: some businesses experienced large increases in demand, some innovated and created good new business opportunities, but many struggled and faced large drops in business, and others were shut down completely.   For some employers, there have been major declines in revenues leading to challenges in funding retirement benefits. This applies to both public and private sector employers.

It is expected that business innovation and the longer-term learnings from COVID-19 workplace changes may lead to some restructuring of jobs and the workplace. Employers responded to short-term and immediate benefit plan issues in 2020, but they have generally not yet decided what benefit strategies and changes will serve them well for the long-term. My expectation is that companies will see how their business is going, they will restructure business operations and jobs, and then changes in compensation and benefits will follow to fit the new reality. Time will be needed to see how new business strategies work out in this ever-changing environment. 

One strategy that I heard of the business response to the pandemic was labeled “react and recover, respond and reshape.”[1] Immediate challenges kept benefit management busy early in the pandemic. The International Foundation of Employee Benefit plans surveyed employers in April 2020 and again in November 2020 to learn how they had responded to COVID-19 in their benefit plans.[2] Here are some highlights from the results:

  • Just over one-third of the respondents’ organizations offered DB plans. Of those organizations, 18 percent had reviewed actuarial assumptions or plan designs by November, up from 7 percent in April. Twelve percent had updated investment strategies in November, up from 7 percent in April. The DB plans were mostly in the public and multi-employer sectors. Of the corporate plans, 16 percent reported in November that they had delayed minimum contributions as permitted by the CARES Act.
  • The CARES Act[3] includes provisions to allow earlier withdrawal of plan funds in DC plans. Eighty-seven percent of the respondents’ organizations offered DC plans in the April survey. Sixty percent of those with DC added the special early distributions to their plans, and 17 percent were considering doing so. Forty-five percent temporarily increased plan loan provisions and 16 percent were considering doing so. The November survey did not show an increase in the introduction of these provisions. The November survey indicated that 5 percent of eligible employees took COVID-19 related distributions from their DC accounts.
  • Ninety-one percent of the DC plans allowed hardship withdrawals, and they reported some increase in hardship withdrawals. In April, 17 percent said the number of participants taking hardship withdrawals had increased, 1 percent said the number had decreased and 42 percent saw no change. The balance said it was too early to tell. In November, 24 percent said that they saw an increase in employees taking hardship withdrawals, and 62 percent said they saw no change.
  • The respondents in April provided information about the issues where participants were asking more questions. Seventeen percent reported participants asked more questions about DC plan hardship withdrawals, 16 percent asked more questions about plan loans, 12 percent asked more questions about early retirement options and 7 percent reported more questions about DC plan contributions.

Based on the International Foundation survey, it appears that of as of November 2020, not very many participants have actually withdrawn funds from their 401(k) plans. But this could change in 2021. Some employees who were out of work in 2020, and had returned to work, found that they were again out of work or about to be early in 2021.

The SOA report on COVID-19 and DB plans[4] provided separate discussions about corporate plans, multiemployer plans and public employee plans. The economic environment created strains on the funding system, and funding relief for 2020 was provided in both the U.S. and Canada. In March 2021, the U.S. enacted longer-term single-employer and multiemployer funding relief measures vis-à-vis the American Rescue Plan Act, or “ARPA.”[5] The extent of the impact of the market fluctuations on the plan depends in part on its investment strategy. DB Plans with a liability driven-investment strategy are less likely to be affected. Some plans will probably revisit their investment strategies. Industries that have suffered major declines in 2020 include airlines, hotels, restaurants and entertainment. Relief packages will help some employer organizations but not all. Many local governments are suffering and hoping for some relief. Some will have major issues related to liquidity and pension contributions that are not offset by the government relief efforts. I expect that some companies will rethink the structure of their benefits, but not until they know what their business and human resources policy will look like going forward. 

The impact may be greatest for severely underfunded multiemployer plans. Those plans covering people in areas of heavy unemployment will have major drops in revenue without comparable declines in obligations. The impact of the pandemic may be to push some of the plans into bankruptcy earlier. 

In an Employee Benefit Research Institute webinar,[6] the presenters mentioned a number of plan changes being considered by sponsors of DB plans including early retirement windows, limited in-service distributions from plans, temporary reductions to benefit accruals, phased retirement programs, and a move away from DB plans to shift more risk to employees. 

What does “react and respond, recover and reshape” mean for benefits? Layoffs and workforce reductions are a component of business response to COVID-19. Accompanying benefit plan approaches in the recovery phase include voluntary retirement incentives, flexible working hours, particularly for people with young children, and elimination of non-essential perks and benefits. Compensation themes include salary reductions, reductions in salary increase levels, lump sum payments in lieu of salary increases and revision of incentive goals. The big theme for the long term is reshape, and many companies are looking at reshaping their work arrangements as well as reducing their workforces. Themes under consideration include more flexibility for remote workers and in work arrangements. At the Conference Board presentation, it was observed that employees in many companies are more concerned about their benefits since COVID-19 and employees will likely pay more attention to benefit plan details, particularly in health, life and disability benefits.  

The Future for Retirement Plans

I am assuming that for now we can expect the U.S. to continue with a three-tier retirement system: Social Security and government benefits, employer-sponsored benefits, and individual savings. But each tier may change, and many of the working population do not have benefits in all three tiers.

The reshape phase of the response will be largely in the future and it will respond to organizational trends. Prior to the pandemic, there were many challenges already facing the U.S. retirement system including the need to improve the financial condition of Social Security and Medicare, many Americans without retirement savings or with inadequate savings, the decline of defined benefit plans, and retirement ages that did not reflect longer life spans. Growing inequality and racial disparities were also found in retirement resources.

COVID-19 added a new layer of challenges that will likely increase the number of Americans without sufficient retirement resources and make it more difficult for plan sponsors to fund their retirement programs. It also made it clear how important employer- provided benefits are. It makes dealing with the pre-existing challenges to retirement benefits even more important.

Some of the big questions to be considered include:

  • What changes will be made to get Social Security and Medicare into financial balance? What mix will there be of benefit reductions and funding increases?
  • Will the employer continue to play a major role in retirement benefits? How will that role evolve? How important will these benefits be as part of the retirement package?
  • Will employers play an increasing role in encouraging emergency funds? Will policy help with that?
  • How will nursing homes, assisted living and other systems that provide care during retirement evolve? Will more care be provided at home and how will it be managed?
  • What are the appropriate retirement ages for the future? How do we balance increasing life spans with great differences in life span by race and ethnicity?
  • Jobs are the key to being able to save for retirement and retirement security. Can there be more good jobs and how do we accomplish that? Will they be structured differently?
  • Will there be a permanent increase in remote work, and if so, how will that change building resources for retirement and the opportunities that exist for working in retirement?
  • DC plans usually do not offer lifetime retirement income. Should more DC plans include retirement income options and how can this be encouraged?
  • Will the SECURE Act lead to significant changes in DC plans? What further steps are needed?
  • Will employers and public policy help facilitate work during retirement for people who are planning to gradually move into or phase into retirement?
  • Individual retirement accounts are available to Americans who are not saving in an employer plan, but few actually save in them. What mechanisms will be used to encourage more individuals who are not covered by a current employer plan to save for retirement? Will more States adopt savings programs and what role will states’ plans play?


The U.S. economic security and retirement system was in need of patching before COVID-19, but now it is in greater need of updating. Many people have short-term issues and are financially fragile. I expect that the needs of this group may be addressed first. However, it is very important that, as a society, we honestly examine the changing demographics and longer-term issues, and make a plan to adjust with them.

Available Research Reports

The Society of Actuaries (SOA) Aging and Retirement Strategic Research Program offers research and consumer education on a broad range of retirement-related topics. The research is designed for actuaries, retirement plan sponsors, advisors, the policy community and the public. Some reports focus on employee benefits, some on the individual in retirement, some on long-term care, some on mortality, etc. The program has issued a series of reports on COVID-19 and retirement and these are listed at the end of this article. The program, started in 2018, brings together more than 20 years of work from several different SOA groups. The research has focused on major themes affecting individuals and retirement planning, the work has been summarized in a series of reports titled “Understanding and Managing Post-Retirement Risks.” They are also listed at the end of this article. All of the work of the program can be found on the SOA website, Aging and Retirement page.

SOA Research: COVID-19 and Society of Actuaries Retirement Risk Research

Retirement Related COVID-19 Resources

Impact of COVID-19 on Aging and Retirement – Essay Collection

General Resources—COVID-19 Statistics Update July 8, 2020

Understanding & Managing Post-Retirement Risks


Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.

Anna Rappaport, FSA, serves as chairperson of the Committee on Post-Retirement Needs and Risks. She can be reached at


[1] From a Conference Board webcast, Compensation and Benefits in a Post COVID-World, June 30, 2020

[2] International Foundation of Employee Benefit Plans, “Employee Benefits in a COVID-19 World,” April 2020. Seven hundred ninety-three respondents representing a mix of private sector corporate plans, public employee plans and multiple employers responded. For those areas that had shutdown, nearly all were in shutdown mode at the time of the survey. This report was updated and “Employee Benefits in a COVID-19 World—Six Month Update” was published in January 2021. Five hundred twenty-seven organizations responded to the second survey. Both of the surveys include samples of corporate plans, multi-employer plans, and public plans.

[3] Federal legislation offering COVID-19 Relief

[4] Defined Benefit Plans and COVID-19: Immediate Challenges for Plan Sponsors, Society of Actuaries, 2020,

[5] The January 2021 Milliman PFI provides an indication of the impact of 2020 on DB plan’s funded status. It states, “The year 2020 was characterized by strong investment gains alongside sharply decreasing discount rates that resulted in an overall $50 billion increase of the funded status deficit.” 

[6] The New Landscape: COVID’s Impact on Defined Benefits, June 30, 2020