It’s the weekend (isn’t it? Sometimes hard to tell these days), which makes it as good a time as any to take a look back at some interesting recent developments. The coronavirus pandemic crisis has impacted just about every aspect of life, and retirement planning is no exception.
So here’s a quick look at a quartet of retirement-related trend news—ranging from evaporating 401k matches to early and unconventional retirements to thinning ranks of 401k millionaires—that have emerged recently and deserve a closer look.
Match Game
A recent Willis Towers Watson survey found just 12% of employers have suspended their matching contributions as a result of the coronavirus pandemic crisis, but another 23% are either planning to or considering suspending their match this year.
Notably, the survey found significantly more companies in hard-hit industries, including retail and business services, made cost-cutting changes. One-quarter of these companies suspended their matching contributions and nearly a third (32%) said they either will or may do so this year.
You may remember our recent article about the Pittsburgh Pirates Major League Baseball team, which recently announced it has suspended matching contributions to employee 401k plans due to the coronavirus pandemic.
“The temporary suspension of retirement benefits is part of an effort to avoid any potential personnel cutbacks,” Pirates General Manager Ben Cherington was quoted as saying.
“We did identify the retirement contributions at least temporarily as an area where we might find some savings without too much impact on people, in terms of their everyday lives,” Cherington said. “Our full expectation is that the contribution will go back into effect as soon as possible.”
Other high-profile companies that have already suspended their 401k match in 2020 include Tenet Health, Marriott, Amtrak, Sabre and La-Z-Boy.
401k Millionaire Ranks Thinned by One-Third
Of course the coronavirus-fueled stock market crash of March (although April saw a surprising rebound) had many 401k participants too scared to check their balance, but Fidelity checked as usual…
Fidelity’s latest quarterly analysis of retirement savings found the March crash decimated the ranks of 401k millionaires. The number of people whose 401k accounts at Fidelity had balances of $1 million or more plummeted to 150,000—down an astounding 33% from a record high of 233,000 at the end of 2019.
As we reported in late April, the average 401k balance at Fidelity was $91,400, down 19% from the record high of $112,300 in Q4 2019.
Millennials: Parents’ Retirement Plan?
The New York Times recently ran a story about the growing trend of retiree parents moving in with their Millennial children because they can’t afford retirement on their own.
Known as the “reverse-boomerang effect,” the article notes the phenomenon of parents moving in with their adult children, often for financial reasons, is on the rise.
According to a Pew Research Center analysis of population data, 14% of adults living in someone else’s home in 2017 were a parent of the head of household, up from just 7% in 1995. And this trend is expected to balloon in the coming decades as Baby Boomers leave the workforce but can’t afford to support themselves, the article says.
“Expressed in starker terms, the Center for Retirement Research at Boston College has predicted that half of today’s workers will not have enough savings to sustain their standard of living when they retire,” the article continues.
Wave of Early Retirements?
A recent study documents the rise of out-of-work Americans who now claim to be retired.
New economic research from SSRN suggests lots of currently unemployed Americans are now not actively looking for new jobs, prompting a new wave of early retirement.
The paper writes that in more severe recessions, a phenomenon known as “discouraged workers,” where some unemployed workers stop looking for work, can occur.
“Early retirement almost fully explains the drop in labor force participation both for those survey participants previously employed and those previously looking for work,” the paper’s abstract notes.
The major point here is that the unemployment rate also consists of people who are actively looking for new work. This study proposes that the unemployment rate is disproportionate from the amount of Americans currently out of work due to many of those unemployed Americans dropping out of the labor force.
“We see a large increase in those who claim to be retired, going from 53% to 60%,” the paper states. “This makes early retirement a major force in accounting for the decline in the labor-force participation.”
On the flip side, another survey we covered recently found 36% of adults within 20 years of retirement now anticipate waiting longer to retire due to the financial fallout of COVID-19.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
