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Americans Tapping 401(k)s, IRAs to Cover Basic Expenses: Survey

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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.”

The Kiplinger–Personal Capital national poll was conducted Nov. 4 to Nov. 10 among 744 respondents age 40 to 74 who had retirement savings of at least $50,000 and were not fully retired. 

A Learning Moment

Three in four respondents said they were somewhat to very worried about their investments because of pandemic-induced market volatility. Nearly half said they checked their portfolio or retirement account balances either daily or weekly. 

Thirty-five percent of men in the poll said they checked their balances daily, compared with 11% of women surveyed.

One in five investors responded to the bear market early in 2020 by shifting to a more conservative portfolio: 9% said they sold investments to boost their cash cushions and 6% 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 just 36% in stocks and 24% in cash.  

The survey found that the fallout from the pandemic on the market and the economy was a learning moment for investors. Here’s what they said:

  • 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 survey also asked participants to discuss working from home, the effect of remote work on their spending and plans for relocation. Two in three said they “love” working from home.


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