COVID-19 pandemic leads to all-time lows in retirement savings

Retirement contributions and new enrollments in employer-sponsored plans have tumbled to record lows amid the coronavirus pandemic, advisors report in the latest Retirement Advisor Confidence Index. 

Retirement planning confidence seemed to have stabilized in the most recent survey, but there's no denying that the economic uncertainty that has accompanied COVID-19 has clients worried.

RACI is a monthly barometer of business conditions for wealth managers, based on a Financial Planning survey of planning professionals. Readings below 50 indicate a decline relative to the prior month, while readings above 50 indicate expansion.

At a time when many businesses are struggling to stay afloat and laying off workers, advisors are seeing fewer clients opening up workplace-sponsored savings accounts.

The component of RACI that tracks new participants in employer-sponsored plans dropped to 38.1, down 20 points from the same period a year ago, marking the lowest score ever reported in the survey.

Overall, the composite RACI score in the most recent period checked in at 43.5, a one-point uptick from the previous month, but off 11.5 points from the same period a year ago.

RACI scores above 50 indicate an increase in client confidence, while scores below that mark signify that confidence is dropping.

Many advisors offer anecdotal reports about the impact that the economic slowdown has had on retirement planning. In practice, that has meant that many clients have been contributing less to their retirement savings.

Overall dollar contributions posted an all-time low score of 41.2, down 2.9 points from the previous month and off 22.9 points from a year ago, according to the survey.

The story was the same for the element of RACI that looks at total retirement products sold to clients. That indicator notched a score of 37.4, another all-time low, and the first time the category dipped below 40. The volume of retirement products sold was down 3.2 points from the previous month and 20 points from the year-earlier period.

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