7 Steps to Take Now to Catch Up on Retirement Savings
Even if your finances weren’t devastated by the pandemic recession, many Americans have not yet started saving. Here’s what you can do.
By John F. Wasik
For millions of retirement savers, the pandemic was a gut punch. There was the jarring stock market drop in March 2020, then millions lost their jobs, health insurance and ability to fund their savings. It was a financial catastrophe for many Americans — and they may not recover for years.
Joni Ratts, a retired San Francisco Bay Area business owner, experienced a version of this 12 years ago, having a “major disaster,” as she called it, with her finances during a difficult divorce. Although she has weathered the pandemic reasonably well, her earlier economic upheaval left her with debt and limited credit, she said. She needed help.
Ms. Ratts, who co-owned a design-build firm with her husband, connected with Clari Nolet, a certified financial planner and certified divorce financial analyst. “Clari evaluated my financial needs and expenses to project how much money I needed to maintain a stable and healthy lifestyle,” said Ms. Ratts, 78. “All of this was new territory for me.”
Now, in the pandemic, people who could otherwise be saving for retirement face similar challenges. Although contributions to retirement savings are often difficult to track, 27 percent of Americans surveyed by the personal finance site FinanceBuzz last year said they had reduced or stopped theirs because of Covid-19.
The pandemic also stymied the 21 percent of adults who hadn’t started saving for retirement, the survey noted, including 45 percent of Generation Z and 20 percent of millennials. In addition, 10 percent of workers reported taking withdrawals from their 401(k)s last year, a jump from 6 percent in 2019, according to a survey by Alight Solutions.
Some companies that suffered the most in the pandemic cut their 401(k) matching contributions. More than 80 with 100 or more employees suspended their matches, according to the Center for Retirement Research at Boston College. Only 26 of them had restored the contributions by April.
Yet the pandemic setback picture is a fuzzy one. Most white-collar and professional employees appear to have felt little impact on the retirement front, according to the center. Those who spent less on work-related costs, like meals and commuting, were often able to save more. And Social Security recipients continued receiving their checks.
While the economy may rebound robustly for most workers, it will still leave millions behind. Nearly half of all workers didn’t have a workplace retirement plan even before the pandemic, said Anqi Chen, assistant director of savings research at the center.
The unequal impact of the pandemic amplifies the gaps in the U.S. retirement system, Ms. Chen said. Although “401(k) contributions and balances seem relatively unaffected and unemployment has not disproportionately hurt older workers, the pre-Covid weaknesses remain: Social Security has a long-term deficit, 401(k) balances are inadequate, and older workers have trouble finding new jobs.”
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