The widespread financial strain brought by the pandemic forced some Americans to pull from their retirement savings and long-term investments, a new survey found.
Some dipped into their retirement accounts or scaled back savings while others cashed out stock investments, a move many regretted later, according to a survey of 1,000 non-retired Americans from Real Estate Witch, owned by Clever Real Estate.
“Unfortunately, people were making what looked like poor choices,” Dr. Francesca Ortegren, a data scientist at Clever Real Estate, told Yahoo Money, "although they were probably necessary at the moment.”
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Since March 2020, more than a third of Americans have raided their retirement savings to get by, according to the survey.
Those who cashed out depleted an average of 44% of their balances, and more than 1 in 6 said they spent more than $25,000 from their retirement savings.
Ortegren called the withdrawal amounts “staggering."
“People were taking money out of their retirement savings to help pay for their everyday finances,” she said, “and that was something that was concerning.”
The initial pandemic-driven panic sent the stock market into a nosedive in March of last year. Amid the uncertainty, 3 in 10 survey respondents who had investments took money out of the stock market and the average person sold 43% of their holdings during the pandemic.
A preponderance (46%) cited the move as a solution for a short-term cash injection, followed by having cash on hand for an emergency (40%) and the desire to make a safer investment (35%). Other reasons included the desire to make a riskier investment (35%), cash to fund a large purchase (34%), and the fear of volatility (30%).
Seller’s remorse soon set in as markets rebounded to pre-pandemic highs. Three in 5 people who got rid of stocks regretted their decision. Millennials carried the greatest sense of regret, with nearly two-thirds wishing they kept their stock investments in place; almost 3 in 5 Boomers regretted their decision to cash out stocks.
Many Americans who experienced income losses reduced how much they could save for their long-term goals. Retirement contributions were cut by an average of 3%, the study found.
Baby Boomers, who don’t have the luxury to make up for lost time, reduced their retirement contributions by 5%. Gen Xers slashed their retirement contributions the most by 11%, the survey found, while millennials cut back by 1%.
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However, nearly two-thirds of Americans plan to increase their retirement contributions after the pandemic to make up for lost time once life returns to normal. Another third plan to contribute to other investments. Just 9% plan to further decrease their retirement contributions once the pandemic eases.
“I think there's going to be a subset of people who do start saving more just in case something like this happens again,” Ortegren said. “You’d think that this would be an eye-opener for many people, but behaviors are hard to change, that's for sure.”