The Enduring Impacts of the COVID-19 Pandemic on Americans’ Economic Security

Abstract

We examine how the pandemic has influenced Americans’ short-term financial security and future retirement stability using longitudinal survey data from the Understanding America Study (UAS), spanning the period May 2018 to May 2022. We find that while, on average, Americans’ short-term financial stability improved through the first year of the pandemic, Americans’ financial security decreased between 2021 and 2022. In particular, relative to 2021 levels, we observe reductions in financial satisfaction and short-term savings behavior and balances, and an increase in the proportion of respondents spending in excess of their income. Part of the decline appears to be driven by difficulties dealing with the spike in inflation: Approximately 30% of respondents reported that the price increases were causing them either a “moderate” or “high” amount of financial stress, and these individuals experienced particularly stark reductions in short-term financial stability. Despite declines in the pandemic’s second year, on average, short-term financial security remained above prepandemic levels in 2022. Impacts on retirement security, however, appear bleaker. We observe reductions in retirement saving behavior and balances in 2022, both relative to 2021 and to prepandemic levels: On average, our sample was less likely to be saving for retirement and had lower retirement savings in 2022 than in 2019, despite being three years older. Collectively, our results suggest that the observed improvements in short-term financial stability may not translate into improved retirement outcomes in the future.