Half of Americans dipped into their retirement savings to get through the pandemic: study

Yahoo Finance’s Sibile Marcellus joins Seana Smith to break down how consumers are pulling money from retirement accounts.

Video Transcript

SEANA SMITH: Welcome back to "The Ticker." New data out shows that half of US households have already withdrawn or plan to withdraw money from their retirement accounts because of financial troubles related to coronavirus. We have Sibile Marcellus looking into this for us. And, Sibile, what are the numbers telling us at this point?

SIBILE MARCELLUS: So, Seana, we're getting new insight into how Americans are dealing with the financial shock from the coronavirus pandemic, and new Deutsche Bank research shows that half of US households have withdrawn or are planning to withdraw from their retirement accounts in order to be able to make ends meet.

So that comes down to 30% who withdrew money over the past two months from their retirement accounts and 19% who haven't yet but plan to do so.

Now the CARES Act does facilitate taking money out of your retirement account, whether it's a 401(k) or an IRA. Now you have to be eligible, and part of that requirement is that you either were diagnosed with the coronavirus pandemic yourself or your spouse was or a dependent was. Number two, that you lost your job or were furloughed. So those are some of the conditions that allow you to qualify for this.

But if you do, what the CARES Act allows you to do is take money out of your retirement account, up to $100,000 per person total, even if you have several other retirement accounts, and you don't have to pay that 10% tax penalty even though you are younger than 59 and 1/2 years old. It also suspends the 20% mandatory tax withholding that otherwise you would be required to pay.

SEANA SMITH: Sibile, do we have any idea of what exactly they are using this money to spend it on? Is it for necessities? Is it things like food and, I guess, anything that-- bills that they need to pay at this point?

SIBILE MARCELLUS: Yeah, so we're getting some insight into what they're spending the money on, but we're seeing that millions of Americans, more than 36 million, lost their jobs. Many still have not received their unemployment benefits after actually having lost their jobs. So many Americans are just trying to make ends meet.

When you look at April's retail-sales numbers, you see that even grocery-store sales fell by 13% after being a bright spot last month. So that shows that a lot of Americans, either they're eating what they already stockpiled last month or some are starting to starve themselves to make ends meet and cutting back even more on costs.

SEANA SMITH: Yeah, it really just highlights the financial troubles that so many Americans are facing at this point. Sibile, thanks so much.