Many Americans now agree that they took more than was necessary from their retirement savings account during the COVID-19 pandemic.
According to new data from Voya, nearly half (47%) of individuals who took a loan or withdrawal from their retirement plan or other investments due to COVID-19 agree that they withdrew more than they needed. Still, a large amount (68%) of individuals agree that they are now in a better place financially because they took a loan or withdrawal.
With many individuals experiencing financial uncertainty, the CARES Act provided an important lifeline for those struggling with economic hardship from the pandemic to take early coronavirus-related distributions or loans from qualified retirement accounts. But despite the majority of respondents agreeing they are in a better place financially as a result of taking a loan or hardship withdrawal, Voya’s survey reveals concern about the impact that borrowing from their retirement savings will have on their long-term financial wellness.
A majority (65%) agreed that borrowing from their accounts has put them behind in saving for retirement. What’s more, 59% wish they had consulted a financial professional before taking a loan or withdrawal. Those who took withdrawals also now emphasize the need to lean on their employers to navigate these difficult financial decisions.
“This past year has especially highlighted that individuals are in need of 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,” notes Heather Lavallee, CEO of Wealth Solutions at Voya Financial. “It’s also important for individuals to know that if they did have to do so, they can get back on track—and as employers we can help.”
According to Voya, many individuals have already taken actions to get back on track financially. The survey results also reveal that 38% of Americans are reducing overall expenses and 29% are reevaluating their monthly budget.
Among the solutions Voya suggests are helping employees build their emergency savings both inside and outside of a retirement plan. “With greater understanding as to how individuals accessed their workplace retirement plans and other long-term savings to meet their needs, we believe there is an opportunity to leverage this new research and look at ways we can help individuals become better prepared for financial emergencies,” says Charlie Nelson, vice chairman and chief growth officer at Voya Financial.
The survey was conducted March 12–15, 2021, through the Ipsos eNation omnibus online platform among 1,005 adults, including 154 who took a loan or withdrawal from their retirement accounts.