- For many Americans, the pandemic has caused a major setback in their retirement plans.
- Nearly 60% of Americans withdrew their retirement accounts during the pandemic, according to a recent survey.
- Most withdrawals from retirement accounts in 2020 represented significant amounts of money.
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Nearly 60% of Americans withdrew their retirement accounts during the pandemic, according to a recent survey by financial magazine Kiplinger and Personal Capital, a wealth management organization.
The pandemic caused many people to borrow from their future to meet their daily needs during state strikes and the largest number of jobs lost since the Great Depression.
According to the survey, in 2020, most people aged 50 to 74 were forced to drain funds from their IRA or 401 (k). While 63% of respondents said they used the funds primarily to cover day-to-day expenses, other respondents cited medical bills, home repairs and financing for other family members.
The withdrawals were also not small. Most withdrawals from retirement accounts represented significant amounts of money, with about a third of respondents withdrawing more than $ 75,000.
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The Kiplinger survey was conducted during the end of the year and included 744 respondents between the ages of 40 and 74, equally divided between the sexes, with retirement savings of at least $ 50,000. The online survey has a 95% confidence level.
Kiplinger Personal Finance editor Mark Solheim said the research shows the long-term ramifications of the pandemic.
“The past year has shaken the confidence of most Americans who save for retirement,” Solheim said in a press release. “With many people spending their savings for retirement or planning to work harder, 2020 will have a lasting impact in the years to come.”
For many Americans, the pandemic has caused a major setback in their retirement plans. More than half of respondents said they plan to work harder or postpone retirement as a result of last year’s financial circumstances.
While the United States government tried to implement bills that would save Americans from the financial consequences of the pandemic, almost 30% of Americans surveyed borrowed under the CARES Act enacted in March, which allowed loans of up to $ 100,000. 58% of borrowers borrowed between $ 50,000 and $ 100,000.
According to the National Bureau of Economic Research, most retirement funds in the United States were already underfunded before the pandemic began. Nearly half of Americans between the ages of 32 and 61 have no retirement savings and the majority of those who do have savings below $ 21,000, according to a 2019 study by the Economic Policy Institute.
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“Last year presented many challenges,” said Jay Shah, president of Personal Capital. “The pandemic not only created a global health crisis, it also affected the financial outlook and retirement plans of many.”
As the pandemic has forced more people to dig up their retirement funds, many Americans may be forced to depend on Social Security.
In 2020, the Budget and Political Priorities Center reported that 20% of retirees depend on Social Security to make up at least 90% of their income, while half depend on funds for more than 50% of their income.
For many Americans, Social Security funds will not even come close to subsidizing their current lifestyle. In November 2020, the average monthly Social Security benefit was around $ 1,476, according to the Social Security Administration.
The pandemic has also forced many Americans to retire ahead of schedule, which can also have lasting effects for older workers who have chosen not to retire and will not have as much time as younger workers to compensate for lower wages in 2020.
Many of the 22 million jobs lost in the United States during the pandemic are unlikely to return in the years to come. According to Moody’s Analytics chief economist Mark Zandi, the U.S. will not recover the jobs lost during the pandemic’s start until 2024.