COVID-19 Economic Shock... "Negative Impact on Retirement Savings and Pensions"

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] A survey has revealed that the economic shock caused by COVID-19 negatively affects savings and pensions for retirement preparation.

Researcher Kim Hyeran from the Korea Insurance Research Institute analyzed the results of an online survey recently conducted by the Wharton School of the University of Pennsylvania in the report titled "The Impact of COVID-19 on Retirement Savings and Annuitization."

The Wharton School conducted a survey of 5,108 Americans to identify how COVID-19 affected Americans' retirement savings levels and annuitization decisions.

According to the survey results, the group likely to experience financial shortages due to COVID-19 had a 19.7% lower proportion of respondents advising to increase retirement savings compared to the group not experiencing such shortages. Additionally, the proportion advising to annuitize retirement assets was 13% lower.

This suggests that economic pressure caused by COVID-19 negatively influenced perceptions regarding retirement savings levels and annuitization.

On the other hand, no significant differences were found in perception changes about retirement savings levels and annuitization between groups with high and low risk of COVID-19 infection.

Also, differences in the risk of death from COVID-19 did not show changes in perception about retirement savings levels; however, when the risk of death was higher, advice to annuitize was 12% lower.

The analysis indicates that COVID-19 has affected not only people's health but also their financial situations, influencing perceptions about retirement preparation.

Researcher Kim pointed out that policies allowing early withdrawal of retirement funds after COVID-19 could weaken long-term retirement security and that financially vulnerable individuals may suffer the most damage.

Several countries, including South Korea, Israel, the United States, and Australia, have allowed early withdrawal of retirement funds due to COVID-19. In South Korea, the revised "Enforcement Decree of the Employee Retirement Benefit Security Act" in October 2020 permits early withdrawal of retirement pay not only in cases of natural disasters but also in cases of social disasters such as infectious diseases like COVID-19.