Nearly seven in 10 (68%) individuals who took a loan or withdrawal from their retirement plan, a traditional lender or investments due to COVID-19 agree or strongly agree that they are now in a better place financially because they took a loan or withdrawal, according to a Voya Financial survey.
However, nearly half (47%) say they took more money than they needed, and 59% reported they wish they had consulted a financial professional before taking a loan or withdrawal. Two-thirds (65%) say borrowing from their accounts has put them behind in saving for retirement.
However, in December, recordkeepers reported that they saw low uptake in general for coronavirus-related distributions (CRDs) and loans since the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020. While some savers reported lower retirement confidence earlier this year, researchers found that the pandemic hasn’t affected retirement savings overall, as there were not mass withdrawals from accounts, and the stock market experienced an upswing since major falls last March.
The Employee Benefit Research Institute (EBRI) has said the effect of COVID-19 on retirement is “manageable.” And its latest Retirement Confidence Survey found that 80% of retirees are confident in their ability to live comfortably throughout retirement, up from the 76% of retirees who held that view last year. It also notes that 72% of workers are confident in their ability to retire comfortably, up 3 percentage points from last year.
“This past year has especially highlighted that individuals need a first line of defense when experiencing a financial shock and, as a result, many may have had no choice but to turn to their hard-earned savings. It’s also important for individuals to know that if they did have to do so, they can get back on track,” says Heather Lavallee, CEO of wealth solutions, Voya Financial. “We are working with many of our clients to help them understand ways that they can play a role in helping their employees rebuild their retirement savings and become better prepared for potential future short-term financial needs. This includes solutions and options for helping employees build their emergency savings both inside and outside of a retirement plan. And with many possibly deciding how best to utilize a stimulus payment and or a tax refund, now is an opportune time to help individuals address their short- and long-term savings needs.”
According to Voya, many individuals have already taken actions to get back on track financially. The results of the survey also revealed that nearly four in 10 (38%) Americans are reducing overall expenses, and more than one quarter (29%) are re-evaluating their monthly budget.
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