Covid-19, Investment Risk, and Retirement Security

Investment risk and retirement income security are constant bedfellows. This paper provides estimates of investment risk for defined contribution (DC) plan members to illustrate the importance of compounding (both positive and negative) during the accumulation phase of retirement saving and associated retirement income during the decumulation phase. In addition to workers being exposed to investment risk via their DC plan, older workers face significant COVID-19 related headwinds in the labour market. The cresting of investment risk with the current pandemic may create a lost generation of those approaching retirement (and recently retired) through lower contribution rates and an unfavourable path of returns.