A new survey found that three in 10 Americans have already dipped into their 401(k)s or other retirement accounts as a result of financial stress brought on by the coronavirus pandemic.
Another 19% said that they plan on doing so but haven’t yet, meaning roughly half of Americans either have or will tap into their retirement savings to help them get through the current crisis.
On average, those who withdrew funds from retirement accounts took out $6,757, according to the online survey by wholly owned Lending Tree subsidiary MagnifyMoney of 1,239 Americans with a retirement savings account, fielded April 28-May 1, 2020.
There are generational differences in who is making withdrawals: 40% of Gen Xers took money from retirement vs. 37% of Millennials. Only 7% of Boomers have taken money from their nest egg.
Of those with six-figure incomes and above, 37% have taken money from retirement funds.
The survey also found that 60% of those who have withdrawn money from their retirement accounts say they regret their decision to do so. Notably, 77% plan to pay back those funds.
Contributions being paused or reduced
The survey also found that 47% of retirement savers have either stopped or lowered their retirement contributions amid the pandemic. Specifically, 21% have reduced their contributions, while 26% have stopped saving altogether.
Notably, one of the generations most likely to pause their retirement contributions was actually the age group closest to their golden years—Boomers—with 53% stopping their contributions. Meanwhile, 17% of Millennials have paused their retirement contributions, followed by just 10% of those in Gen Z.
More key findings
- More than half of those who took out retirement money did so to cover necessary expenses like groceries or housing payments and bills, and one-in-four wanted to take advantage of legislation allowing penalty-free withdrawals.
- Of those obligated to take required minimum distributions (RMDs), 56% plan to skip that in 2020 as allowed for by the CARES Act. That’s mostly true for Millennials and Gen Xers, who are likely beneficiaries who have inherited a retirement plan. Far fewer Boomers and members of the silent generation plan to forego their RMD.
- Retirement accounts aren’t all that’s getting raided. Nearly a third of Americans have withdrawn funds from an investment account other than retirement savings over the last 60 days.
SEE ALSO: 4 COVID-Related Retirement Planning Trends
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.
