Many people's retirement dreams received a reality check following the economic downturn caused by the coronavirus pandemic.
New research shows that's especially true for older workers.
A recent report from Democrats on the Joint Economic Committee of Congress found that workers ages 65 and up were hit harder by unemployment than prime age workers ages 25 to 54. In April, older workers' unemployment rate exceeded prime age workers by three percentage points, the biggest gap ever recorded, the research found.
And while that difference narrowed in the following months, the concern is that could be because older workers simply gave up looking for work.
Near retirees — those ages 55 to 64 — are not in a much better position. One-third of those workers have neither a pension nor a 401(k) plan or other employer-provided retirement savings plan.
Workers in that age group who do have access to those retirement accounts have a median of $88,000 saved, according to the report.
Consequently, people who are approaching retirement may want to work longer. But finding employment opportunities may be tough. Age discrimination and high health care costs can make finding a new job difficult, the report pointed out. Meanwhile, those workers face higher health risks if they are exposed to Covid-19.
"If you're in the 55 to 65 range, it's not just six months, a year or a year and a half, it's the rest of your life that is affected by this," said Rep. Don Beyer, D-Va., vice chair of the U.S. Congress Joint Economic Committee.
Those employment trends may lead older workers who can to pursue non-traditional jobs, such as temporary or part-time work, or work in the gig economy.
Research indicates that about a quarter of older workers ages 50 to 64 are working in those kinds of positions at any given time, according to the Center for Retirement Research at Boston College. That data is from before the pandemic, and those numbers could increase following the high unemployment numbers brought on by the downturn.
The Center for Retirement Research recently evaluated what options older workers who pursue non-traditional work have to shore up their retirement savings.
"That latter part of your career is one where ideally you're making the most you're ever going to make" and have the highest ability to save, said Matt Rutledge, research fellow at the Center for Retirement Research.
"If you don't have a place to put that money aside, you're really missing out compared to the people that do," he said.
One way for those workers to invest is in an individual retirement account, or IRA. The maximum that older workers can save in those accounts, though, is much lower than for a 401(k). In 2020, workers ages 50 and up can invest up to $7,000 year in an IRA, compared to $26,000 for a 401(k).
Yet only about 15% of people of all ages contribute to an IRA, according to the Center for Retirement Research. Some states have established auto IRA programs so that workers who do not have access to retirement plans through their employer can automatically save via their pay checks.
Another way some older workers can still save is through their spouse's 401(k), according to the Center for Retirement Research.
Those couples would need to save more to cover retirement costs for two people. That often does not happen, the report found.
One reason for that is many older workers still may prioritize immediate expenses over their long-term savings goals, Rutledge said.
"A lot of older workers say, 'What difference would a little bit of savings do for me now? It's not going to have time to really grow," Rutledge said.
Admittedly, younger workers stand to benefit the most from putting money toward retirement, because the cash will have more time to compound.
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But there are a couple of things that older workers can still do to help preserve their lifestyles later on.
"The best thing for saving is getting used to living on less," Rutledge said. "You are lowering the bar that you need to clear to be able to afford to live."
Another way to make your money last longer is to keep working if you can.
"As long as you're healthy enough to do so, the best thing you can possibly do for your finances is just to keep working," Rutledge said.
Research has shown that, in some circumstances, working just one year longer can make a bigger difference than saving 1% more over the course of a career, he said.