The Covid-19 pandemic has led many people around the world to reassess their priorities and goals.
Many countries have seen infection rates soar through various waves of the virus, resulting in widespread lockdowns with large parts of their economies closed and people forced to remain at home. In a more uncertain world, people have also sought to re-examine their spending.
A recent survey by Schroders in the US found that saving for the future (39%) is among the top three activities that respondents have devoted more attention to since the Covid-19 crisis began. Health and fitness (53%) and spending time with family (52%) were also in the top three, the survey found.
However, despite the apparent desire to save more, the survey found that respondents had paid more additional attention to deciding what to watch on Netflix (38%) than on developing a financial plan/strategy (29%) or their investment portfolio (26%) during the Covid-19 crisis.
We spoke to Joel Schiffman, a distribution specialist at Schroders in New York, to discuss the results of the survey and find out why taking the time to plan your retirement investments is so important.
Why does Schroders carry out this annual survey?
Joel Schiffman said: “The survey provides us with valuable insights about investors’ changing behaviours and expectations when it comes to their retirement. Retirement planning is a very significant financial decision, if not the most important one most of us will ever make.”
When you look back at 2020, what are the biggest takeaways from the survey?
Joel Schiffman said: “Covid-19 has touched every aspect of our lives, including the financials, and particularly when you think about planning, saving and investing for the future. We were pleased to see that nearly 40% of Americans had focused more time and attention on saving for the future during the lockdowns. Only health and fitness, and spending time with the family ranked higher in the survey.
“Interestingly, fewer people in the survey were focused on retirement planning and their investment portfolios. The survey also revealed that more people were watching Netflix than were focusing on retirement planning. Obviously, we believe that retirement planning should be a higher priority.”
Why do people find planning for retirement so difficult?
Joel Schiffman said: “There are a number of reasons why people find retirement planning difficult. Some don’t feel they have enough money to do any planning. Some have other financial priorities that are more important to them right now.
“People need to be realistic about the lifestyle they want in retirement and to start saving. If you start saving in your 20s, the ability to have an accumulated nest egg when you’re into retirement is that much greater compared to starting in your 40s.”
What are the top concerns surrounding retirement that came out of the survey?
Joel Schiffman said: “Healthcare costs and health issues were the things that most people were concerned about, which is understandable as these are things will affect people as they get older. Last year saw a major market downturn, so people were also concerned about the potential for the market to go against them.
“For many people it’s thinking about what kind of lifestyle you want (in retirement) and not knowing how to best generate any income. This is not just about having a lifestyle, but about being able to pay your bills. Overall, it’s really a fear of outliving your money.”
But isn’t failing to plan just a case of burying your head in the sand?
Joel Schiffman said: “Fear creates inertia and sometimes it’s a case of not seeking enough help or getting enough help. There are advisors and there are basic ways that people can start their investment journey, such as opening an account. It doesn’t have to be large scale. People get caught up in the idea that they need a lot of money to start a retirement plan. The problem is that if people are uncertain about how to do something, they end up just sitting on their hands rather than taking the first step.
“There is no wrong time to begin saving and build a retirement plan. The focus needs to be on what you can and can’t control. As an investor, it’s important to be able to control the things you can control. Things like healthcare costs, market corrections and global pandemics are all out of our control. But you can save and invest and choose when you retire; those are all decisions that are under our control. So, if you can plan and work on the variables that are under your control, you’ll likely have a much better chance of success.”
About the survey
The Schroders US Retirement survey was conducted by 8 Acre Perspective with 1,000 consumers aged 45-75 across the country asked for their views. Respondents were evenly split by age and gender. By age: 45-59 (367), 60-69 (348) and 70+ (285). By gender: male (501) and female (499).
This interview was taken from Schroders' weekly Investor Download podcast, available on iTunes, Spotify and other major podcast providers.