Americans largely stayed away from their 401 (k) and other defined contribution plans during the Covid-19 crisis, choosing instead to cut spending and sell valuables, Empower research shows Institute, the research arm of Empower Retirement.
Research has found that in dealing with the financial difficulties so far during the Covid-19 crisis, 35% of those surveyed have cut spending, 15% have dipped into their savings, 11% have postponed a student loan, and 11 % maximized credit cards.
The online survey of 684 DC plan members, conducted in April by the Harris Poll, also found that 36% of Americans would rather sell their valuables than tap their retirement savings.
Even under the CARES (Coronavirus Aid, Relief, and Economic Security) law, the survey showed that as of June, only 1.4% of eligible pension plan members had made a withdrawal. The report found that 44% of those who make CARES Act withdrawals have already borrowed from their accounts.
The CARES Act allows qualified individuals to borrow up to $ 100,000 from qualified plans such as 401 (k), 403 (b), and IRAs without penalty. However, borrowers would be required to pay tax on these distributions on a pro rata basis over three years.
When asked what their last resort would be to access money if they needed it, 29% said they would dip into their retirement account, 27% said they would stop contributing to their retirement savings, 26% said they would borrow from a friend or family and 26% said they would max out their credit cards. Research found that only 8% withdrew money from their retirement savings accounts at work and 10% stopped contributing to their accounts.
Many respondents said that certain actions are prohibited when it comes to protecting their savings. Forty-seven percent indicated that they had not considered or would not consider postponing their student loan repayment to a later date if they were facing financial difficulties; 36% would not like credit cards at most; and 34% would not borrow money from a family member or friend. Additionally, 28% said they did not or would not consider withdrawing money from their retirement savings account at work, and 24% would not stop contributing to their retirement savings .
As to who has the highest initial loan and withdrawal activity, research has indicated that they are workers in the airline, entertainment and manufacturing industries. The average disbursement is $ 20,000 and only 4% took the maximum disbursement of $ 100,000, according to the research.
Edmund F. Murphy III, President and CEO of Empower Retirement, noted that although people across the country are facing difficult financial situations and it is difficult to stick to their goals d ‘Retirement Savings, “Working Americans are proving they are determined to protect their retirement savings and future financial freedom by first pursuing other financial movements to close any income gap caused by this pandemic,” he said. he said in a press release.
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