ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / NEWS

Employees Drawing Out Retirement Savings at All-Time High? Here Are the Reasons

Generation Z workers are particularly susceptible to early withdrawals, with 28% having taken such a step, followed by millennials (24%).
UPDATED JAN 22, 2024
Cover Image Source: Pexels/Pixabay
Cover Image Source: Pexels/Pixabay

The financial well-being of workers and their ability to save for retirement is a growing concern in today's challenging economic landscape. According to a survey conducted by the Transamerica Center for Retirement Studies (TCRS), the share of workers pulling out their retirement savings remains at an all-time high. The survey reveals that 37% of workers have taken a loan, early withdrawal, or hardship withdrawal from their 401(k) or similar plan or IRA. This trend highlights the financial struggles faced by workers and their pessimistic outlook on retirement, per Yahoo!finance. Additionally, recent changes in legislation may further exacerbate the issue, making it easier for individuals to tap into their retirement funds. 

The survey conducted by TCRS found that 30% of workers took a loan, while 21% took an early and/or hardship withdrawal. Generation Z workers are particularly susceptible to early withdrawals, with 28% having taken such a step, followed by millennials (24%), Generation X (19%), and Baby Boomers (12%). These findings align with other surveys that indicate a rising trend in retirement account withdrawals.

Image Source: Pexels/Pixabay
Image Source: Pexels/Pixabay

The primary obstacle preventing workers from saving for retirement is debt. The survey reveals that 53% of workers cite debt as the main roadblock to saving for retirement. Millennials, Generation X, and Generation Z are more likely to identify debt as an issue compared to Baby Boomers. These findings highlight the financial challenges faced by different generations, ranging from student loan burdens for Gen Z to supporting both children and parents for Gen X.

Apart from debt, workers are resorting to hardship withdrawals for various reasons. The survey identified paying for medical expenses (17%), preventing eviction (16%), disaster-related expenses (15%), education costs (14%), purchasing a home (13%), repairing a home (12%), and burial or funeral expenses (6%) as common reasons for accessing retirement funds. The financial impact of inflation, economic disruption, and income inequality has forced a significant portion of the working population to tap into their retirement savings.

Image Source: Pexels/Karolina Grabowska
Image Source: Pexels/Karolina Grabowska

The high rate of retirement withdrawals is a cause for concern because of the long-term consequences it entails. Many workers are deeply worried about their retirement prospects. According to the TCRS survey, 41% of workers believe that future generations of retirees will be worse off than the current generation. The survey also reveals their greatest retirement fears: outliving their savings and investments, reduced or nonexistent Social Security benefits, declining health, and long-term care costs, inability to support their family's needs, and rising long-term care expenses. Baby Boomers and Generation X are more likely to fear outliving their savings compared to millennials and Generation Z.

Behind this pervasive fear of outliving their money lies the stark reality that a significant portion of workers is struggling to make ends meet. The survey indicates that 57% of Generation Z workers and 48% of millennials are having difficulty covering their expenses. This financial strain extends to 42% of Generation X and 23% of Baby Boomers. The lack of sufficient income remains a major obstacle preventing workers from saving for retirement.

Image Source: Pexels/Buro Millennial
Image Source: Pexels/Buro Millennial

Experts express concerns that recent changes in legislation may further encourage workers to withdraw from their retirement savings. The SECURE 2.0 Act, passed at the end of 2022, introduced six new penalty-free ways to access retirement accounts before the age of 59. The intention was to incentivize workers to contribute more to their retirement accounts by providing easier access to funds if needed. However, experts worry that this could lead to increased withdrawals and undermine retirement security. There is a risk that individuals may begin viewing these accounts as savings rather than specifically designated retirement funds.

MORE ON MARKET REALIST
After the contestant, Drew Carey broke the board further while trying to fix it...
19 hours ago
As it so turned out, a crucial ruling from the judges led to a BIG win for the player.
21 hours ago
When a guest brought a precious Charles Rohlfs chair, expert John Sollo confessed that he was nervous to appraise it.
23 hours ago
The guest had no idea about the item being a Tiffany product and being embedded with a rare gem.
1 day ago
The host was baffled by the goof up that the contestant made between two words.
1 day ago
Carey showed that he has got the weapon of sarcasm, and he isn't afraid to use it.
1 day ago
Whatever the host was expecting, it was far away from what the contestant said on national TV.
1 day ago
The guest was surprised to learn more about the item he had actually found on the street for free.
2 days ago
After going through everything on the board, the player left Harvey in hysterics with his answer.
2 days ago
As it so turned out, the weird-looking floor lamp was a piece from a very famous studio.
2 days ago
Most contestants were consistently getting the answers wrong, and Harvey was worried about what was next.
3 days ago
Some claimed that they got the puzzle despite English being their second language.
3 days ago
The letter was written to a columnist in response to a piece taking a swipe at Sinatra.
3 days ago
In a special episode of Celebrity Family Feud, a WWE star decided to go for the one thing Harvey is known for.
3 days ago
Luck was shining for her as she was off to a flying start and won the car with a single card.
4 days ago
Sajak had a witty reply for the contestant who was fanboying over White during the game.
6 days ago
The model said that considering White's age she would also take the offer from Sony.
6 days ago
Sheila won a brand new entertainment unit, complete with an HD plasma TV and mini bar from Howard Miller.
7 days ago
The appraiser disclosed that Yoakum began painting in the 1960s and he created one unique piece of art every single day.
7 days ago
The entrepreneur also managed to get the sharks to taste the vegan alternative meant for pets.
7 days ago