When COVID-19 hit and plunged the country into economic turmoil, many workers had to deal with their own private financial crisis and plunged into retirement savings to survive. Now they regret this decision.
Thirty-three percent of employees withdrew or borrowed from their 401 (k) or IRA in 2020, according to a survey conducted by Kiplinger and wealth management firm Personal Capital. About 47% of employees who took out a retirement loan say they took more than they needed, according to a new study from Voya Financial. Fifty-nine percent would like to have consulted a financial professional before making the decision.
While the majority of employees surveyed by Voya say they are currently in a better financial position thanks to their retirement, they now face new concerns about the impact this could have on their long-term financial well-being. term.
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“Sixty-five percent of those who borrowed said they felt it had put them behind in saving for retirement,” says Healther Lavalle, CEO of Wealth Solutions at Voya Financial. “It can also mean that workers have to delay retirement or have to work at another job during retirement.”
It is now up to employers, Lavalle says, not only to help employees get back on track with their savings, but also to spur education to help individuals understand the benefits that exist to help compensate. unforeseen financial difficulties.
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“The past year has highlighted the fact that individuals need a first line of defense when they experience financial shock,” she said, pointing to supplemental insurance, HSAs and savings accounts. emergency as vital tools. “With access to these types of benefits, [employees] would have immediate access to cash to cover some of these [unexpected] expenses. Companies can help employees set up emergency savings plans outside of their retirement savings. “
Employees rely more than ever on their employers to ensure they are financially, physically and emotionally well, and employers are increasingly focusing on providing holistic support to workers.
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“Think about the general needs of your employees,” says Lavalle. “Think about how your general benefit offerings – including retirement savings and emergency savings – help meet these needs. And watch your partners to see if they are supplementing those needs with the right kind of educational support. To finish, [provide] tools to enable these employees to easily make the right decisions at critical moments in their lives. “