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The pandemic had a significant impact on the financial health as well as the physical health of Americans in 2020. Nearly six in 10 withdrew or borrowed money from an IRA or 401(k), often to cover basic living expenses, a new survey by Kiplinger's found.
The amounts of money people withdrew or borrowed were significant. Thirty-two percent of respondents said they withdrew $75,000 or more from a retirement account, while 58 percent of those who took loans borrowed between $50,000 and $100,000. Additionally, more than one-third said they now plan to work longer because of the financial impact the pandemic has had on their plans for retirement.
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In addition to living expenses, respondents said they used the funds for:
- Medical expenses, 41 percent
- Home repairs, 32 percent
- Auto repairs, 29 percent
- Tuition, 23 percent
- Helping family members, 21 percent
Pandemic-induced market volatility left nearly three-quarters of respondents somewhat to very worried about their investments. Nearly half said they check their portfolio or retirement account balances either daily or weekly. Men were more than three times as likely as women to say they check their balances daily.
A few investors (19 percent) responded to the bear market early in 2020 by shifting to a more conservative portfolio. Nine percent of respondents sold investments to boost their cash cushions, and 6 percent sold all of their stocks.
As of the survey date, current asset allocations for investment portfolios or retirement accounts remained conservative, with investors typically holding 36 percent in stocks and 24 percent in cash.
Investors reported five takeaway messages from the pandemic and its impact on the economy:
- My portfolio strategy was able to weather the bad times.
- I need to have more cash reserves.
- I need to diversify more.
- I took on more risk than necessary.
- I need to rebalance my portfolio more often.
"The past year rocked the confidence of most Americans saving for retirement," said Mark Solheim, editor of the magazine. "With many people dipping into their retirement savings or planning to work longer, 2020 will have a lasting impact for years to come."
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
