Three in 10 Americans withdrew from an IRA or 401(k) during the pandemic, and nearly 3 in 10 took a retirement plan loan, according to a survey from Kiplinger’s Personal Finance magazine and Personal Capital, a digital wealth management firm. Two-thirds of them used the money to cover basic living expenses.
The study didn’t specify whether participants who withdrew and those who borrowed were mutually exclusive.
The amounts people borrowed or withdrew were substantial. Thirty-two percent of survey participants who withdrew money said they took $75,000 or more from a retirement account, and 58% of those who took loans borrowed between $50,000 and $100,000.
Kiplinger and Personal Capital noted that a provision in the CARES Act allowed people under the age of 59½ affected by the coronavirus to take a distribution of up to $100,000 from an IRA, 401(k) or similar account without penalty. It also permitted loans of up to $100,000.
Besides covering everyday living expenses, survey participants reported these uses of their distribution or loan:
- Pay medical expenses – 41%
- Home repairs – 32%
- Auto repairs – 26%
- Tuition – 23%
- Help family members – 21%
Thirty-five percent of respondents said they planned to work longer because of the pandemic’s financial repercussions on their plans for retirement.
“The past year rocked the confidence of most Americans saving for retirement,” Mark Solheim, editor of Kiplinger Personal Finance, said in a statement. “With many people dipping into their retirement savings or planning to work longer, 2020 will have a lasting impact for years to come.”