Workers tap retirement savings to cope with coronavirus pandemic
A majority of people expect their retirement plans to be affected by the crisis
The coronavirus pandemic has put a financial strain on people and households throughout the United States, and a new survey shows that many have turned to their retirement stash as a means to meet immediate payment obligations.
More than one-in-three people were thinking about or had already decreased retirement savings contributions, according to new data from TD Ameritrade. And others are putting retirement plans on hold. Forty-four percent of people said they would delay retirement as a means to cut costs, while 51 percent were open to picking up a job.
About 17 percent of people told TD Ameritrade they had already tapped their retirement accounts as of May, and 21 percent said they were considering doing so. Nearly 30 percent of respondents had withdrawn, or were considering withdrawing, from their 401(k) accounts, and 27 percent said the same about their IRA and Roth IRA accounts.
Lawmakers approved legislation that gives individuals greater flexibility to tap retirement accounts as a means to help them weather the financial effects of the virus. People can take up to $100,000 from their 401(k) retirement stash without being subject to the 10 percent penalty – so long as the funds are used for coronavirus-related financial needs. Individuals will, however, have to pay income taxes on the money.
CORONAVIRUS AND RETIREMENT: EXPERTS' 401(K) TIPS
Experts, however, are cautioning against using this option if possible. Jeff Schneble, CEO of Human Interest, said it could eventually compromise the ability for people to retire down the line – especially considering people would essentially be selling at a time when the market is near a low point in valuation.
Nevertheless, 71 percent of respondents said their retirement plans will be affected by the pandemic when compared with the Great Recession (58 percent).
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On the bright side, many Americans are hoping to shore up their savings accounts when their financial situations stabilize. Seventy-two percent said they would “prioritize” saving for retirement once the pandemic ended.
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