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- For many Americans, the pandemic has caused a major setback in their retirement plans.
- Almost 60% of Americans withdrew from their retirement accounts during the pandemic, according to a recent survey.
- Most withdrawals from retirement accounts in 2020 were large sums.
- Visit the Business Insider homepage for more stories.
Nearly 60% of Americans withdrew from their retirement accounts during the pandemic, according to a recent survey by financial magazine Kiplinger and Personal Capital, a wealth management organization.
The pandemic has caused many people to borrow from their futures in order to meet daily needs throughout state shutdowns and the largest number of job losses since the Great Depression.
According to the survey, in 2020 most people between the ages of 50 and 74 were forced to drain funds from their IRA or 401 (k). While 63% of those polled said they mostly used the funds to cover daily living expenses, other respondents cited medical bills, home repairs, and funding for other family members.
The withdrawals were also not small amounts. Most withdrawals from retirement accounts were large, with about one-third of respondents withdrawing more than $ 75,000.
Read more: I am a financial advisor to employees of Google, Salesforce and Microsoft. Here is where I tell them to put their money to prepare for early retirement.
The Kiplinger survey was conducted at the end of the year and included 744 respondents aged 40 to 74, split evenly between the sexes with retirement savings of at least $ 50,000. The online survey has a 95% confidence level.
Kiplinger Personal Finance editor-in-chief Mark Solheim said the investigation shows the long-term ramifications of the pandemic.
“The past year has shaken the confidence of most Americans who are saving for retirement,” Solheim said in a press release. “With many people tapping into their retirement savings or planning to work longer, 2020 will have a lasting impact for years to come.
For many Americans, the pandemic has caused a major setback in their retirement plans. More than half of survey respondents said they plan to work longer or delay retirement due to the financial situation of the past year.
As the US government tried to implement bills that would spare Americans from the financial consequences of the pandemic, nearly 30% of Americans surveyed took out loans under the CARES law signed in March, which allowed loans up to $ 100,000. 58% of those who took out loans borrowed between $ 50,000 and $ 100,000.
According to the National Bureau of Economic Research, most pension funds in the United States were already underfunded before the start of the pandemic. Nearly half of Americans aged 32 to 61 have no retirement savings, and most of those with savings of less than $ 21,000, according to a 2019 study by the Economic Policy Institute.
See also: Mini-pensions can help prevent burnout, but re-entering the workforce afterward can be difficult. Here’s how to do it, from 4 people who actually did it.
“The past year has presented many challenges,” said Jay Shah, president of Personal Capital. “The pandemic has not only created a global health crisis, but it has had an impact on the financial outlook and the retirement plans of many people.”
As the pandemic has forced more people to dig into their retirement funds, many Americans may be forced to rely on Social Security.
In 2020, the Center on Budget and Policy Priorities reported that 20% of retirees depend on Social Security for at least 90% of their income, while half depended on funds for more than 50% of their income.
For many Americans, Social Security funds will fall short of subsidizing their current lifestyle. As of November 2020, the average monthly Social Security benefit was around $ 1,476, according to the Social Security Administration.
The pandemic has also forced many Americans to retire sooner than they expected, which could also have lasting effects on older workers who have chosen not to retire and who will not have as much time as young workers to compensate for the fall in wages in 2020.
Many of the 22 million jobs lost in the United States during the pandemic are unlikely to return for several years. According to Moody’s Analytics chief economist Mark Zandi, the United States will not regain the jobs lost during the outbreak of the pandemic until 2024.
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