- For many Americans, the pandemic has caused a major setback to their retirement plans.
- According to a recent survey, nearly 60% of Americans withdrew from their retirement accounts during the pandemic.
- Most retirement account withdrawals in 2020 represented significant amounts.
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According to a recent survey by the financial magazine Kiplinger and Personal Capital, an asset management organization, nearly 60% of Americans withdrew from their retirement accounts during the pandemic.
The pandemic caused many people to borrow money from their futures to meet day-to-day needs during the shutdown of the state and the highest number of job losses since the Great Depression.
According to the survey, in 2020, most people between the ages of 50 and 74 were forced to withdraw money from their IRA or 401 (k). While 63% of those surveyed said they mainly used the money to cover daily living expenses, other respondents mentioned medical bills, home repairs, and funding for other family members.
The withdrawals were not small amounts either. Most retirement account withdrawals represented significant amounts, with about a third of respondents withdrawing more than $ 75,000.
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The Kiplinger survey was conducted at the end of the year and included 744 respondents between the ages of 40 and 74, spread evenly across genders with retirement savings of at least $ 50,000. The online survey has a confidence level of 95%.
Kiplinger’s Personal Finance editor Mark Solheim said the investigation shows the long-term consequences of the pandemic.
“Over the past year, it has sparked the confidence of most Americans who are saving for retirement,” Solheim said in a press release. “With many people depositing into their retirement savings or planning to work longer, 2020 will have a lasting impact for years to come.”
For many Americans, the pandemic has caused a major setback to their retirement plans. More than half of survey respondents said they plan to work longer or retire due to the financial circumstances of the past year.
While the U.S. government sought to pass bills that would spare Americans from the financial fallout of the pandemic, nearly 30% of Americans surveyed took out loans through the CARES Act signed into law in March, which provided loans up to $ 100,000 allowed. 58% of those who took out loans borrowed between $ 50,000 and $ 100,000.
Most pension funds in the US were underfunded before the pandemic started, according to the National Bureau of Economic Research. According to a 2019 study by the Economic Policy Institute, nearly half of Americans between the ages of 32 and 61 have no retirement savings, and most of those who do have savings of less than $ 21,000.
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“Last year presented many challenges,” said Jay Shah, president of Personal Capital. “Not only did the pandemic trigger a global health crisis, it also impacted the financial outlook and retirement plans of many.”
As the pandemic has forced more people to dig into their retirement funds, many Americans may be forced to rely on Social Security.
In 2020, the Center for Budget and Policy Priorities reported that 20% of retirees depend on Social Security to earn at least 90% of their income, while half depend on the funds for more than 50% of their income.
For many Americans, Social Security funds will come nowhere near subsidizing their current lifestyle. As of November 2020, the average monthly Social Security benefit is about $ 1,476, according to the Social Security Administration.
The pandemic also forced many Americans to retire earlier than they expected, which could also have lasting consequences for older workers who chose not to retire and who won’t have as much time as younger workers for the lower wages in 2020.
Many of the 22 million US jobs lost during the pandemic are unlikely to return in the coming years. According to Moody’s Analytics chief economist Mark Zandi, the US will not regain the jobs lost during the outbreak of the pandemic until 2024.