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A new survey about how employees are coping with financial strain showed that most respondents were not thinking about or planning to dip into retirement accounts early as an option to make ends meet amid the virus pandemic.
"Understanding how people plan to handle financial strain can help employers provide the right tools to help their employees stay on track," Empower Retirement said in a paper that detailed the online survey, conducted in April as the novel coronavirus pandemic was causing mass layoffs and furloughs across professional industries.
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The paper incorporated information from the 684-respondent survey and from Empower data of participants with a defined contribution plan as of June 2020. The participant data showed, among other things, that "the vast majority of Empower participants have not taken money from their retirement plans or changed their contribution rates."
Amid the uncertainty of COVID-19, respondents were asked about what measures they have taken to help maintain financial stability. Thirty-five percent of the survey respondents said they had reduced spending, the top response. Other leading responses included tapping into savings or an emergency fund, and maxing out credit cards.
Nearly one in three respondents said that only as a last resort would they take money out of a retirement savings account or stop contributing to a retirement account, the Empower survey showed. Empower's paper said workers in the airline, entertainment and manufacturing industries showed the highest initial loan and withdrawal activity regarding retirement accounts.
"Overall, the data shows that tapping retirement accounts to access money is often a last resort—if it's something employees would consider at all," Empower's paper said.
Other financial industry surveys show Americans are deeply concerned about how the COVID-19 crisis will impact their retirement accounts. Nearly 70% of respondents in a TD Ameritrade retirement survey said they expected the pandemic to affect their retirement plans. Still, a majority of respondents in the TD Ameritrade survey said withdrawing from retirement savings was a last resort.
In a separate financial independence survey, TD Ameritrade said six in 10 respondents reported that the pandemic had "derailed their journey to financial independence."
Empower's paper offered guidance to employers amid the tumult of the coronavirus crisis. "Employers can reinforce the wise steps many employees are already taking, such as reducing their day-to-day spending and continuing to prioritize retirement contributions. They can also work with their recordkeepers to provide personalized communication, financial wellness tools and one-on-one advice," Empower said.
READ MORE:
- Will COVID-19 push employers to overhaul retirement plans?
- Decisions to postpone retirement due to COVID-19 vary by U.S. city
- Re-visiting retirement plans in a post-COVID world
- The millennial, boomer, Gen X and Gen Z-er mistake employers and advisors make
Mike Scarcella is a senior editor at Law.com in Washington. Contact him at [email protected] and on Twitter @MikeScarcella.
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Mike Scarcella
Mike Scarcella is a senior editor in Washington on ALM Media's regulatory desk. Contact him at [email protected]. On Twitter: @MikeScarcella. Mike works on a slate of newsletters: Supreme Court Brief | Higher Law | Compliance Hot Spots | Labor of Law.
