Seven in 10 Americans say the COVID- 19 pandemic will affect their retirement, with many dipping into their nest eggs, scaling back contributions and planning to work longer, a new survey shows.
“The impact to Americans’ retirement accounts is bigger than that of the Great Recession,” says Dara Luber, senior manager, retirement product for TD Ameritrade. “It’s disrupting their finances.”
And while trillions of dollars in government aid is helping, many people are confused by the programs. Nearly one-third, for example, believe they’ll need to pay back the stimulus checks they’ve recently received next tax season.
Twenty-one percent of those surveyed anticipate the crisis will deliver a severe blow to their retirement blueprint while 50% expect somewhat of an impact, according to TD Ameritrade’s survey of 1,008 adults with at least $10,000 in investable assets. , conducted April 24-May 4.
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By comparison, 18% of Americans said their retirement plans were severely affected by the Great Recession of 2007-09, and 40% said they were somewhat affected.
For many workers, particularly millennials, the two recessions amount to a one-two punch. Forty-three percent of Americans said they’re still recovering financially from the Great Recession.
Generation Xers (age 39-54) have been hurt most by the pandemic, with 76% saying their retirement road map has been somewhat or severely affected.
“They are in their peak earning years and they’re starting to put their retirement more in focus,” Luber says. Meanwhile, she says, “They’re paying mortgages, they have kids in college. If they have a job loss, I would expect they’ll be hit harder.”
The current recession has done more economic damage more quickly than the downturn a decade ago. Since February, nearly 20 million workers have lost their jobs as states abruptly shut down nonessential businesses to curtail the spread of the virus. That compares to 8.7 million layoffs over two years during the Great Recession, which was triggered by a housing crisis.
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The stock market, however, tumbled more steeply in the earlier slump, taking a bigger toll on retirement savings. The Standard & Poor’s 500 index fell about 50%, compared wotj a drop of about a third during the current crisis. And a market rally since late March has left the broad index just 5.2% below its mid-February peak.
Yet many Americans have lost jobs during the pandemic and raided their savings or nest eggs to make ends meet. Seventeen percent have withdrawn money from their emergency funds or saving accounts while another 20% are considering doing so, the survey shows. And 11% have taken money out of their 401(k) accounts while 10% have dipped into their individual retirement accounts (IRAs). Nearly one in five are weighing such moves.
The federal government is waiving penalties on retirement account withdrawals if they’re due to the pandemic.
Workers also have trimmed their contributions to free up more spending money, with 14% setting aside less of their paychecks for retirement savings.
Millennials (age 24-38) have been most financially strained. Twenty-six percent have siphoned money from emergency funds or savings accounts, 16% have pulled cash out of their 401(k)s and a similar share has dipped into IRAs. Seventeen percent have shaved retirement contributions.
“More (millennials) likely have had to stay home” to watch kids while schools are closed, taking a bite out of their incomes, Luber says. “And we know they have more student loans.”
Meanwhile, 15% of Americans have put off retirement and another 24% are considering doing so. And while 16% of baby boomers (55-73) have delayed retirement, 9% have retired early and another 14% are thinking about it. Many older Americans have lost jobs during the crisis.
Yet if they do hang it up, it likely won’t be a traditional retirement, with many boomers working part-time or as gig economy workers, Luber says.
Overall, 51% of Americans are more open to working in retirement because of the pandemic, according to the survey.
And 45% of millennials are more open to living with a roommate to save on expenses.
The government has come to the rescue with a laundry list of financial lifelines, but many Americans are in the dark. Just 26% know they can take money out of a 401(k) without penalty if they’ve been hurt by the pandemic. And just 18% realize they can borrow up to $100,000 from their 401(k).
Despite the damage the pandemic has done to retirement planning and savings, many workers are taking steps to close the gap. Sixteen percent have increased their retirement saving contributions and 31% are considering doing so.
“Even during a time of uncertainty, Americans are doing their best to continue to improve their financial health,” Luber says.
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COVID-19: 71% of Americans say pandemic affects their retirement plans” data-reactid=”36″>This article originally appeared on USA TODAY: COVID-19: 71% of Americans say pandemic affects their retirement plans