The number of people raiding their retirement funds spiked in April as the economic fallout from the coronavirus pandemic strained Americans’ finances.
Almost 165,000 people took hardship withdrawals from their 401(k) or 403(b) retirement accounts this month, according to figures provided to Yahoo Money from Fidelity Investments, which oversees over 30 million 401(k), IRA and 403(b) retirement accounts.
If the torrid pace continues, the second-quarter total will more than double from the first three months of the year when 220,000 account holders, or an average of 73,333 a month, took hardship withdrawals.
The average withdrawal in April was $5,500, while 3,200 individuals took out $100,000, or the maximum amount now allowed under the coronavirus relief legislation, the CARES Act, that passed on March 27. The act also relaxed the tax penalty people face when they withdraw funds early.
Fidelity noted separately in the press statement for its first-quarter analysis that individuals didn’t take significant funds during the first three months, but “ongoing financial uncertainty and provisions within the CARES Act may result in higher loans and withdrawals later in the year.”
The company didn’t provide any additional commentary on April’s numbers.
‘Already seeing the impact of the market downturn’
Fidelity’s first-quarter report also noted that many of its customers have reached out for financial advice during the market volatility.
Average daily customer calls increased 20% in the first quarter compared with a year ago. The company also set up new COVID-19 resource sites online that have generated nearly 1 million views through the quarter.
“We know that investors continue to be concerned about how the economic environment and global pandemic may impact their health and financial futures, and we are already seeing the impact of the market downturn on our clients,” said Kevin Barry, president of workplace investing at Fidelity.
Fewer 401(k) millionaires
One impact is the shrinking number of 401(k) millionaires. The tally dropped 36% to 150,000 401(k) millionaires in the first quarter from its record high of 233,000 in the fourth quarter of 2019.
Retirement balances also shriveled up as stocks tumbled. The average 401(k) balance lost 19% in value, falling to $91,400 from $112,300 in the fourth quarter. That was also off about 12% from a year ago.
The average IRA balance in the first quarter fell 14% to $91,400 in the first quarter from $115,400 the previous quarter.
Newly opened IRAs reach record levels
Market volatility didn’t stop new investors from opening IRAs, though. In the first quarter, a record high of 407,000 accounts were opened, a 36% jump from a year ago.
Millennials invested more, too. Total contributions into both IRAs and Roth IRAs jumped 41% year over year, while the total amount contributed increased by 64% for types of accounts.