Any Kind of Employment Improves Retirement Outlook

July 18, 2012 ( – Only 10% of displaced workers (those unemployed or underemployed) are very confident in their ability to retire comfortably.

A study released by the nonprofit Transamerica Center for Retirement Studies shows that underemployed workers are faring better than the unemployed, most notably through opportunities to earn income, gain access to employer health coverage, and help alleviate the need to take withdrawals from retirement accounts.  Although total household savings in retirement accounts is low among all displaced workers, the estimated median retirement savings of the underemployed (approximately $7,400) is more than triple that of the unemployed (approximately $2,400).   

Underemployed workers also exhibit more proactive approaches for improving their financial situation.  They are significantly more likely than the unemployed to consider making work-related changes, such as switching industries or professions, seeking additional education, or making lifestyle changes.  More than one-third of unemployed workers (34%) are not considering any of these changes. 

“Any form of employment, including part-time or underemployment, has the potential to increase access to healthcare benefits, improve saving power, make a candidate more attractive for future career opportunities – and, ultimately, prevent early withdrawals from retirement accounts,” said Catherine Collinson, president of the Transamerica Center for Retirement Studies.   

The majority (61%) of displaced workers reported having a retirement savings account of any kind.  Despite the vast majority’s familiarity (87%) with taxes and penalties that may apply, current financial challenges are such that more than one-third (35%) of respondents who have retirement accounts have taken a withdrawal from those accounts.    

Of those who participated in a 401(k) plan at their most recent employer where they were fully employed, 45% indicated they have taken a withdrawal from these accounts, including 63% of the unemployed and 34% of the underemployed.

Among the displaced workers, including those with or without retirement accounts of their own, the estimated median household savings in retirement accounts was approximately $5,800.   

The survey found many displaced workers have relied on personal savings and/or gone into debt since becoming unemployed or underemployed. More than half (51%) have tapped into savings accounts; nearly one-third (31%) have used credit cards; and one in four (24%) have turned to family and friends for loans. 

Three in ten (30%) do not have healthcare insurance, including 34% of the unemployed and 27% of the underemployed.    

Transamerica suggests the retirement services industry, media, and employers can help displaced American workers improve their retirement prospects.  The survey report provides specific recommendations, including: increasing outreach efforts and education about the available retirement planning tools and resources and promoting awareness of tax incentives for saving for retirement such as the Saver’s Credit and Catch-Up Contributions.  

From a public policy perspective, in order to help avoid further strains on Social Security, Medicare, and Medicaid, policymakers should consider extending the 401(k) loan repayment period for terminated participants, expanding current tax incentives such as the Saver’s Credit and Catch-Up Contributions, offering tax incentives for job training and retraining, and stimulating jobs creation.  

“Our retirement system is by and large predicated on the assumption that workers must self-fund a substantial portion of their retirement,” said Collinson. “If displaced workers fail to overcome retirement savings setbacks, due to unemployment or underemployment, society may ultimately bear the cost when future generations of senior citizens run out of savings. “ 


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