- For many Americans, the pandemic caused a major setback in their retirement plans.
- According to a recent survey, nearly 60% of Americans withdrew from their retirement accounts during the pandemic.
- 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 provide for the everyday needs during the state disruptions and the largest number of job losses since the Great Depression.
According to the survey, most people between the ages of 50 and 74 had to tap money from their IRA or 401 (k) by 2020. While 63% of respondents said they mainly used the funds to cover daily living expenses, other respondents cited medical bills, home repairs and financing for other family members.
The withdrawals were also not small amounts. Most withdrawals from retirement accounts represent significant amounts of money, with about one-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, equally divided between the sexes with a pension saving of at least $ 50,000. The online survey has a 95% confidence level.
Kiplinger Personal Finance editor Mark Solheim said the survey shows the long-term effects of the pandemic.
“The past year has aroused the confidence of most Americans who have saved for retirement,” Solheim said in a press release. “As many people sink their pension savings or want to work longer, 2020 will have a lasting impact for years to come.”
For many Americans, the pandemic caused a major setback in their retirement plans. More than half of respondents said they plan to work longer or delay retirement due to the financial circumstances of the past year.
While the U.S. government wanted to implement bills that would save Americans from the financial consequences of the pandemic, nearly 30% of surveyed Americans took out loans through the CARES law signed in March, which allowed loans of up to $ 100,000 . 58% of those who took out loans borrowed between $ 50,000 and $ 100,000.
According to the National Bureau of Economic Research, most retirement funds in the U.S. were already underfunded before the pandemic began. Nearly half of Americans between the ages of 32 and 61 have no retirement savings, and most of those who do save under $ 21,000 did a 2019 study by the Economic Policy Institute.
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“Last year presented many challenges,” said Personal Capital President Jay Shah. “The pandemic has not only created a global health crisis, but has also affected the financial prospects 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 make up at least 90% of their income, while half rely on more than 50% of the income on the funds.
For many Americans, social security funds will not subsidize their current lifestyle. According to the Social Security Administration, the average monthly benefit of November 2020 is approximately $ 1,476.
The pandemic has also forced many Americans to retire earlier than they expected, which could also have lasting consequences for older workers who choose not to retire and will not have as much time as younger workers to lower wages in 2020. to make.
Many of the 22 million U.S. jobs lost during the pandemic are unlikely to return for a few years. According to Mark Zandi, chief economist at Moody’s, the US will only recover the jobs lost during the onset of the pandemic in 2024.