Under the menacing shadow of the coronavirus pandemic, many workers are sacrificing their retirement savings in order to keep afloat.
A third of workers have either taken out a loan or made a withdrawal from a retirement account, such as a 401(k), 403(b) or IRA, according to a report released in December by the Transamerica Center for Retirement Studies, a research foundation.
Perhaps not surprisingly, age seems to play a role in whether one is willing to take the risk of retirement savings withdrawals.
Younger workers leading the way
In recent months, workers across the country have struggled financially due to layoffs, furloughs and company restructurings amid the pandemic. Though the government enacted pandemic aid measures earlier this year — and Congress now appears set to approve a new $900 billion coronavirus relief plan — many consumers are nevertheless struggling to make ends meet.
When it comes to drawing down savings, younger workers have been more willing to withdraw from retirement accounts during the pandemic. The Transamerica survey found that 43% of millennials have either taken out a loan or withdrawal from a retirement account or plan to do so in the near future, compared to just 27% of Generation Xers and 11% of baby boomers.
Similarly, boomers were much more likely to completely rule out withdrawing from their retirement accounts, with nearly 3 in 4 (73%) saying such a move was out of the question. In contrast, 36% of millennials and 56% of Gen Xers say they won’t take money from their retirement accounts to deal with the COVID-19 pandemic.
Taking an early withdrawal from a retirement account can have far-reaching implications. Not only might you have to pay a 10% penalty, but you’ll also lose out on having your money earn interest for a longer period of time.
As a result, you may likely have to work longer in order to have enough money for retirement if you raid your account now. Not surprisingly, nearly a third of Americans say the pandemic has already led to a change in their expected retirement age.
Millennials have more time — and more struggles
One obvious reason younger workers may be more willing to take from their retirement accounts is because they have longer to save for retirement. Though a majority of all generations listed paying off debt as a priority during the pandemic, older generations were more focused on saving for retirement.
Specifically, 63% of baby boomers listed saving for retirement as a current financial priority, compared to:
- 55% of Gen Xers
- 41% of millennials
However, younger workers also appear to be struggling more during the pandemic than older cohorts.
Nearly half of millennials (49%) said they were having trouble getting by financially during the pandemic, compared to 44% of Gen Xers and 29% of baby boomers.
On top of that, millennials' outlook on life in general appears to be less rosy. Specifically, 52% of millennials admitted to feeling anxious and depressed "often" during the pandemic, compared to 39% of Gen Xers and 26% of baby boomers.
Methodology: The Transamerica Center for Retirement Studies, a part of the Transamerica Institute, commissioned public opinion firm The Harris Poll to survey 5,277 full-time or part-time workers between Nov. 6 and Dec. 27, 2019. An additional survey of 2,069 adults was then conducted by The Harris Poll during Oct. 22 through Oct. 26, 2020. Included in the survey sample were 1,173 adults who work full- or part-time and/or were laid off or furloughed during the pandemic.
The Transamerica Center for Retirement Studies classified millennials as those born 1979-2000; Generation X as those born 1965-1978, and baby boomers as those born 1946-1964.