One-Third of Employees Are Withdrawing From Retirement Accounts

Thirty-three percent of workers have already or plan to take a loan or withdrawal from their retirement account due to the coronavirus pandemic.

Thirty-three percent of workers have already or plan to take a loan or withdrawal from their retirement account due to the coronavirus pandemic. In a survey conducted by the Transamerica Center for Retirement Studies, 5,277 workers age 18 or older who worked full- or part-time for a for-profit company were asked about their retirement savings and how they have been impacted by the coronavirus pandemic.

Of the group surveyed, 1,173 were laid off or furloughed because of the coronavirus pandemic. The study’s authors note, “While most workers are saving for retirement, some are dipping into their retirement savings as a result of the pandemic.”

When it comes to workers’ confidence in their ability to retire, half of respondents said their confidence level has remained the same. Twenty-one percent said that their confidence in retiring has decreased. More than half (52%) of workers expect to retire after they turn 65 or do not plan to retire at all. Full-time workers have more confidence in their ability to retire at age 65 (24%) compared to part-time workers (19%).

Fear of outliving their savings was the most frequently mentioned (40%) retirement worry. Other fears include Social Security being reduced or diminished (39%) and a decline in health requiring long-term care (34%). The study’s authors state, “Part-time workers are more likely to cite cognitive decline/dementia/Alzheimer’s disease … and feeling isolated and alone … compared with full-time workers.”

In terms of the legal documents these respondents have, 24% have a last will or testament. Twenty-two percent have a medical power of attorney/proxy, 21% have a power of attorney for their finances and 20% have set up a trust. However, 41% of workers do not have any of these legal documents in place.

The study discovered that “Among workers who are offered a 401(k) or similar plan, three in four (76%) participate in that plan and contribute 10% (median) of their annual salary into their plans. Full-time workers (79%) are significantly more likely than part-time workers (58%) to participate in their company’s employee-funded retirement plan. Part-time workers who participate in a plan contribute 15% (median) of their annual salaries to the plan.”

Source: “Retirement Security: A Compendium of Findings About U.S. Workers,” by Catherine Collinson, Patti Vogt Rowey and Heidi Cho; Transamerica Center for Retirement Studies, December 2020.