Workers are still depleting their retirement savings in record time


The rate of workers robbing their future selves is still at an all-time high.

A study released Thursday by the nonprofit Transamerican Center for Retirement Research (TCRS) found that 37% of workers have a 401(k) and similar schemes, or from IRAs, they have experienced loans, early exits, and difficult exits. In collaboration with the Transamerica Institute. This is in line with the level of 2022, which is also the highest level in the history of the survey.

These withdrawals highlight why many workers are pessimistic about retirement as they face a shortage of emergency funds and strained household budgets forced to exploit nest eggs. ing. The practice could become more prevalent as new rules make it easier.

“We are very concerned that retirement security is weak for so many workers,” Catherine Collinson, CEO and president of the Transamerica Institute and TCRS, told Yahoo Finance.

“The pandemic and last year’s turbulent economy, with high inflation and a falling stock market, took a toll on workers’ employment, finances and retirement readiness. Without additional support from policy makers and employers. , it will be very difficult for many workers to recover.”

i need money now

The survey, conducted from November 8 to December 13, 2022, among 5,725 for-profit employees, found that 30% took out loans and 21% exited early or in difficult circumstances. It turned out that it did.

Gen Z is slightly more likely than Millennials, Gen X and Baby Boomers to have experienced early and/or hardship withdrawal (28%, 24%, 19% and 12% respectively).

The overall findings are in line with other research on the crash of retirement accounts.

For example, a recent Vanguard report found that 2.8% of 401(k) plan participants will experience difficult exits in 2022, up from 2.1% in 2021 and 1.9% in 2018, a record high. bottom.

In the first three months of 2023, the number of plan participants receiving indigent withdrawals increased 33% year-over-year, with an average of $5,100 per employee, according to a Bank of America report. is said to have been pulled out.

For the majority of workers (53%), the biggest obstacle to retirement savings is clearly debt: debt, the Transamerica survey found. But there is a big rift between generations. Millennials, Gen X and Gen Z are more likely than baby boomers to say it is a problem (58%, 56%, 54% and 34% respectively).

“Whether it’s Gen Z taking on student loans and getting a job, or Gen X supporting both kids and parents, the lack of savings is hurting everyone,” he said, adding that workers’ economic growth is hurting. Sid Payra, chief executive of Sunnyday Fund, a financial technology firm that backs it, said. emergency funds.
“Thus, when the inevitable financial emergency hits, our research shows that one in five people are sacrificing their retirement security by taking a 401(k) early withdrawal or loan. became clear.”

Other reasons for indigent withdrawal: Payments for certain medical bills (17%), payments to prevent eviction from primary residence (16%), disaster-related costs in federally declared disaster areas and loss (15%), tuition and related education costs (14%), compensation for costs associated with the purchase of the main residence (13%), eligible repair costs for damage to the main residence (12%), and burial or funeral costs (12%). 6%).

“With inflation, economic turmoil and continued wealth and poverty, a portion of the working population needs access to money now,” said adjunct professor and co-director of the Center for Retirement Income at the American College of Financial Services. says Steve Parrish of he told Yahoo Finance. “This includes wiretapping retirement accounts.”

pervasive pessimism

Of course, such withdrawals will have long-term consequences, which may be one reason many workers are concerned.

According to a Transamerica survey, four in 10 workers (41%) believe that future generations of retirees will live worse off than those currently retiring.

Their top retirement fears are loss of savings and investments (39%), reduction or elimination of social security (36%) and worsening health condition requiring long-term care (35%). ), the inability to meet the needs of the family. The survey found family (32%) and expected long-term care costs (31%).

According to the survey, baby boomers and Gen X are more likely than millennials and Gen Z to fear running out of savings and investments, at 49%, 42%, 36% and 32%, respectively.

Behind the palpable fear of running out of money is the stark reality that nearly 6 in 10 Gen Z workers (57%) say they are struggling to make ends meet. Lurking. Nearly half (48%) of millennial workers are struggling to make ends meet, as are 42% of Gen Xers and about a quarter of Boomers (23%).

Researchers say most workers (53%) say they don’t earn enough to save for retirement.

Do you have further withdrawals planned?

LEWISTON, IDAHO, USA _ An elderly woman cashes money and counts dollar bills at a Bank of America ATM machine on December 19, 2011 (PHOTO BY DEAN PICTURES) (Photo by Francis Dean/Corbis via Getty) Images)

(Photo credit: Frances Dean/Corbis via Getty Images)

Experts fear the change in law could cause more workers to plunder their golden age savings.

Parrish said the SECURE 2.0 law, passed at the end of 2022, created six new ways to access retirement accounts without penalties by age 59 and a half. The goal was to motivate employees to contribute more by making these funds readily available as needed without penalty.

“If workers know they can get the money they need before retirement, the expected behavior is to contribute more from each paycheck into these accounts. , fears the public will take these liberalized provisions to Congress and move in and out of retirement plans.The current increase in withdrawals and loans could be an indicator of what’s to come. said Parrish.

“My concern is that people are starting to view these accounts as savings rather than retirement accounts.”

Kelly Hannon is a senior reporter and columnist at Yahoo Finance. She’s a workplace futurist, a strategist for her career and her retirement, and the author of her 14 books, including:Control Over 50: How to Succeed at Your New Job” And “Don’t be too old to get rich”. follow her on her twitter @Kelly Hannon.

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