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Daily Capital

Pandemic Shatters Retirement Plans for Majority of Single Working Moms 

Key Findings

  • A majority (62%) of single working moms do not feel confident in their ability to plan for retirement. Conversely, less than half of the general population (40%) lacks confidence in their retirement plans.
  • More than two-thirds (64%) of single moms no longer feel confident in their ability to retire when they want. That’s in contrast to 43% of the general population.
  • More than half (52%) of single moms do not feel confident in their ability to build emergency savings. Again, this stands in contrast to 39% of the general population and 36% of single dads.

Now a year into the global pandemic, we are witnessing the significant financial strain among parents, particularly single moms.

But there’s a striking longer-term financial impact.

In our recent survey with Empower Retirement, we found that single working parents — especially moms — are much more likely than the general population to have experienced major setbacks in their retirement savings.

A staggering majority of single moms, 64%, (and 51% of single dads) no longer feel confident in their ability to retire when they want. That’s in contrast to 43% of the general population.

Causes for Retirement Unreadiness 

There are sundry reasons for questioning retirement readiness amidst widespread financial straits.

The total number of women who have left the labor force since the start of the pandemic reached over 2.3 million in January, according to the National Women’s Law Center. (By comparison, nearly 1.8 million men have left the labor force since February 2020.) This leaves women’s labor force participation rate – the percent of adult women who are either working or looking for work – at 57.0%. Before the pandemic, women’s labor force participation rate had not been this low since 1988.

We found that working single mothers, compared to the general population, are more likely to:

  • Be paying off a student loan
  • Be pessimistic about the state of the U.S. economy
  • Anticipate missing a bill payment and accumulating more debt than normal due to the pandemic
  • Not be able to achieve savings goals
  • Say they are “barely surviving” financially
  • Say they’re not sure how they’ll cope if schools close down again (much more than single dads)

Single Parents are Reacting Differently

Single moms — though concerned about the economy and about the stability of their retirement plans and investing portfolio — are actually staying the course when it comes to their money much more than the general population.

Unmarried fathers, on the other hand, report making big moves in their financial plans.

Financial Action Taken as Result of Pandemic Single Dads Single Moms General Population
Sold investments to reinvest them 60% 36% 38%
Sold investments to cash out 49% 36% 37%
Removed money from workplace retirement plan 49% 38% 36%

 

Financial Insights for Families

The pandemic has been a challenging financial time for millions of households. Following is advice from our experts for families struggling financially.

1. Prioritize the basics.

Build your emergency fund (3-6 months of expenses) and pay off high interest debt as your first priorities.

Because money is one of the most significant sources of stress for many Americans, having funds set aside in savings can create the peace of mind necessary to reduce financial stress.

Craig Birk, CFP, Chief Investment Officer at Personal Capital, advises automating your savings.

He suggests setting up automatic transfers from your checking account to your retirement savings accounts, such as a 401k or IRA, in addition to your savings account. You won’t have to think about it. It will take extra work on your part not to save because you’ll have to cancel the transfer manually.

Read More: How to Master a Household Budget

2. Make the most of tax season.

When filing your taxes this year, be sure to take advantage of as many tax credits as you can to decrease your tax burden or increase your tax return.

Read More: Tax Deduction vs. Tax Credit: What’s the Difference?

Prior to filing, create a checklist with our Guide to Filing Your Taxes in 2021. If your taxes are getting complicated, consider working with a tax professional who can help you avoid the last-minute scramble next year. Many online tax preparers now offer affordable options to work with a tax pro remotely.

For investors, year-round, solid tax management can significantly increase your portfolio’s value over time. Tax-efficient investing can be complex, but it doesn’t need to be complicated. Our tax specialists created a free, straightforward guide, 5 Tax Hacks Every Investor Should Know, free to download. Those who get the guide also gain access to the Personal Capital financial dashboard, which gives you a comprehensive view of all your financial accounts.

3. Try to avoid tapping your retirement funds.

It may be tempting to pull money out of your 401k, but this can jeopardize your future and could come with costly penalties and taxes.

According to our survey results, single parents were more likely than the general population to withdraw or borrow money from their retirement accounts. Another recent Personal Capital survey revealed that almost two-thirds of the people who pulled out money used their retirement savings to cover basic living expenses.

During a financial crisis, it can sometimes feel near impossible to focus on long-term planning.

Debbie Macey, a senior financial advisor at Personal Capital, recommends a shift in mindset. “Think of it this way: Rather than putting money ‘away,’ you are actually ‘paying it forward,’” she said.

Read More: Your Guide to Retirement Planning

The pandemic — now one year in — has demonstrated that life can be unpredictable.

“Ultimately, the pandemic reminds us of the need to be flexible with personal finance,” said Daniel Kellogg, CFP, a financial planning income specialist with Personal Capital. “Even the most detailed, forward-looking plan can be wrong, especially in a time like now. It is OK to make adjustments as changes occur.”

Read the Full Survey Report

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Alicia Castro is the Managing Editor of Daily Capital.
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