Coronavirus pandemic forces retirement savings to take backseat, study shows
As the coronavirus pandemic continues to send shockwaves through the U.S. financial world, a new study shows Americans are concentrating less on their retirement savings as other priorities take precedence.
About half of Americans said they do not have time to address investments or retirement savings due to increased responsibilities in other areas of their lives, a new survey from Fidelity Investments found.
Many are likely more immediately concerned with their primary source of income.
About 33 million Americans have filed jobless claims since mid-March. The unemployment rate skyrocketed to 14.7 percent in April which is the highest level since the Great Depression, as the U.S. shed an unprecedented 20.5 million jobs.
Correspondingly, 62 percent of people said they were concerned about job security, and 43 percent of those people reported they were “extremely or very concerned,” according to Fidelity.
Stress has increased for nearly half of respondents in regards to paying off student loan debt (49 percent), having enough saved for retirement (46 percent) and paying down other debt besides student loans (45 percent).
While retirement savings account balances have likely taken a hit during the market downturn, experts say if individuals can keep that money where it is, the accounts will likely recoup those losses in the long-term.
However, for those who need access to their retirement savings in the near-term, the CARES Act relaxed rules on withdrawing money from 401(k) accounts. Individuals can take up to $100,000 from that retirement stash without being subject to the 10 percent penalty – so long as the funds are used for coronavirus-related financial needs. The money will be subject to income taxes.
Experts caution against taking advantage of this provision, when possible. Withdrawing during a market downturn – when account balances are depressed – is not generally a great option if it can be avoided.
On the plus side, some Americans said the pandemic has caused them to take positive steps to improve their long-term financial situations. Nearly 50 percent said they were cutting back on discretionary spending, while 44 percent were working to increase emergency savings. Another 34 percent were rethinking how they managed their money and 31 percent were more openly discussing finances with their family and friends.