Americans have been through a lot over the past two years, and a new study shows that during that time many ended up making “downright ugly” decisions regarding their retirement planning – often out of necessity.
Fidelity Investments’ 2022 State of Retirement Planning Study shows an alarming number of people either halted their retirement savings or cashed out their nest eggs altogether as a result of financial strains from the coronavirus pandemic, or after leaving their jobs during the “Great Resignation.”
Planning on hold
More than 40% of the general population put their retirement planning on hold during the pandemic, and that number was even higher, at 55%, among young investors ages 18-35. In fact, nearly half of respondents from that next generation said they do not even see a point in saving for their later years until things return to “normal.”
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Of the next-geners who quit their jobs during the Great Resignation and had a 401(k), 1 in 5, or 21%, cashed out their accounts after leaving.
“The fact that so many people who left their jobs as a result of the Great Resignation also cashed out of their 401(k)s may be cause for concern,” said Rita Assaf, vice president of retirement at Fidelity. “Taking money out of your retirement accounts completely should be avoided unless the immediate need is critical and there are no other options, not only because of the tax implications, but also due to the impact on your retirement nest egg.”
Although a majority of Americans expressed optimism that hang-ups from the past two years are behind them, with 65% of those polled telling Fidelity that 2022 is their year for waving goodbye to the pandemic and looking to the future, numbers show a new fear has emerged: inflation.
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One of the biggest concerns Fidelity observed was that 71% of Americans are worried about inflation’s impact on their retirement planning — and almost one-third don’t know how to make sure their retirement savings keep up.
But this is no time to panic, Assaf says.
“The encouraging news is, rising costs might not be as big a threat to your retirement lifestyle as you may fear,” she told FOX Business.
“One piece of advice for retirement savers and inflation, is to not worry too much,” Assaf said. “Based on what we know about retirees and their satisfaction once they get to retirement, most aren’t spending as much as they anticipated and yet they’re feeling pretty good about where they are.”
“If you have a good retirement plan in place, you should be able to weather these storms, too,” she added.
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