Pandemic forcing later retirements

Despite light at the end of the pandemic tunnel, 30 percent of Americans have withdrawn money from their retirement savings and a similar percentage plan to retire later because of the crisis, including people who lost income in this period, according to a national study.

MagnifyMoney, a consumer and financial information service, surveyed more than 2,000 consumers —about half of whom have a retirement savings account — to find out the continued impact of the crisis. Key findings included:

  • The pandemic is preventing many Americans from saving for retirement. Forty-eight percent of people with a retirement savings account either stopped saving or decreased their contributions. About 1 in 6 haven’t started saving again.
  • The majority who tapped retirement savings for extra cash regret it and have begun replenishing their savings.
  • Three in 10 Americans say they were already behind in saving for retirement before the pandemic hit, and 59 percent of consumers feel they’ll never catch up to where they need to be.
  • Twenty-five percent of consumers say they’ll likely need to retire later. That figure jumps to 42 percent among those who lost income during the crisis.
  • Lack of income is the biggest barrier consumers face when it comes to saving for retirement.

The survey, which was conducted online, sampled a combined 2,050 consumers in four age groups–Baby Boomers (56 to 75), Generation X (41 to 55), Millenials (25 to 40), and Generation Z (18 to 24).

Some good news-bad news from the survey: Forty-one percent of respondents say the coronavirus pandemic didn’t impact their retirement savings. In fact, 11 percent of consumers say they were able to increase contributions. But the other 48 percent of respondents have either stopped contributing or decreased contributions temporarily or altogether.

More good news-bad news: The majority of consumers were able to leave money in their retirement savings, with 39 percent saying they have withdrawn or borrowed from their accounts during the pandemic. But those who took money from their retirement savings mostly weren’t doing so out of precaution or for advantageous reasons–47 percent used the money to cover expenses, with another 21 percent using it to help a loved one struggling financially. Other reasons included paying off debt, taking advantage of no-penalty withdrawals, losing a job, and worrying about losses in the stock market.

It’s important to understand the dangers of borrowing from your retirement savings — even when there isn’t a tax penalty in certain scenarios, said Ismat Mangla, MagnifyMoney’s content director.

“Taking an early withdrawal may seem like a good quick fix for some cash, but doing so can seriously derail your long-term retirement savings,” Mangla said.


Source: Magnify Money, an online, free financial and consumer information service. Its parent company is Lending Tree, an online financial lending marketplace.