With COVID-19 creating unrest in the financial markets and leading tens of millions to file for unemployment, the outlook of retirement security across America has been impacted.
On March 27th, Congress passed the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act), which gives employees the choice to access more of their retirement savings, without penalties.
Additionally, it allows employers to temporarily suspend contributions to their company’s retirement plans.
In a report from May 2020, the International Foundation of Employee Benefits Plans(IFEBP) found that a significant number of workers were removing money from their 401Ks. Also, a fair share of companies announced the suspension of matched contributions to defined benefit plans.
Jill Fopiano, CEO of O’Brien Wealth Partners, a Boston-based investment fund, says “While it is usually best not to touch your retirement funds, the pandemic and its impact on jobs and the economy have really hurt some who don’t have a sufficient rainy day fund. The current situation might justify tapping retirement savings as a last resort.”
According to Richard W.Johnson, Director of the Retirement Policy at the Urban Institute, “unlike previous recessions, this pandemic-led downturn has hit older workers especially hard and will likely create long-term employment challenges for them.”
The Transamerica Institute provided a breakdown of how COVID-19 affects the retirement of people, generationally.
In its May 2020 report, it finds, 32% of baby boomers said they are now concerned about their retirement future, in contrast to 25% of Generation X and 20% of Millennials.
Baby Boomers are generally more distraught, since they have less of a time horizon to recover retirement assets invested.
Chicago plan advisor Michael Barry, said in a recent opinion article in Plan Sponsor magazine, “There is likely to be a boom in the employment of the young, at the expense of employment of the old." He feels that retirees without enough savings might even find it harder to come by job opportunities.
The National Bureau of Economic Research, concludes that the rise in unemployment may cause older workers to retire early, writing that “we see a large increase in those who claim to be retired. This makes early retirement a major force in accounting for the decline in the labor-force participation. It suggests that the onset of the Covid-19 crisis led to a wave of earlier than planned retirements.”
For More from American Retiree: https://www.americanretiree.com/post/your-island-vacations-might-be-still-possible