Self-assessed Savings Adequacy Before and After the COVID-19 Pandemic

Abstract

Among the consequences of the COVID-19 pandemic were disruptions to household finances. U.S. households were buffeted by many negative shocks, such as inflation, unemployment, investment or business losses, or family issues, including death. At the same time, economic stimulus payments, reduced household expenses, and, for some households, investment or business gains, helped offset these shocks. This paper uses data from the RAND American Life Panel from before and after the onset of the pandemic to assess how such shocks affected households of persons 60 to 79 years of age, including their savings and the adequacy of them for future expenses. We found that 75 percent of older adults reported experiencing a negative shock that set them back financially over the course of the pandemic, primarily inflation. Such negative shocks were less frequent among persons 70 or older, Black persons, those in better health, and those with higher income. We found 52 percent reported unexpected financial gains, such as a stimulus payment. These were more prevalent among persons with lower income. On balance the economic situation of the typical sample member was not harmed over the course of the pandemic according to several different indicators of self-assessed saving adequacy. Inflation, however, was perceived to be an important potential threat: Conditioning on persistent higher inflation, the subjective probability of running out of wealth almost doubled.