Many Americans borrowed more than needed from their 401(k) savings during the Covid crisis, setting them back in their retirement goals, according to research by Voya Financial.
But most said the loans or hardship withdrawals have stabilized their situations. The CARES Act allowed qualified individuals to take up to $100,000 in penalty-free distributions from eligible retirement plans, and a three-year reprieve on paying the taxes.
The survey, which was conducted in March through Ipsos and included 1,005 adults, found that nearly half of individuals who dipped into their retirement savings due to Covid agree or strongly agree they withdrew too much, and more than two-thirds agree or strongly agree that the loan or withdrawal has put them in a better place financially.
But the survey results show that most of the borrowers are now realizing that they have compromised their long-term financial wellness. Two-thirds (65%) agreed that they have fallen behind in retirement. More than half (59%) also not regret not seeking out a financial professional before taking a loan or withdrawal.
Voya said the survey also found that many individuals have already taken actions to get back on track financially. It further revealed that 38% of Americans are reducing overall expenses, and more than a quarter (29%) are reevaluating their monthly budget.
“This past year has especially highlighted that individuals are in need of a first line of defense when experiencing a financial shock and, as a result, many may have had no choice but to turn to their hard-earned savings, Heather Lavallee, CEO of Wealth Solutions, Voya Financial, said in a statement. “It’s also important for individuals to know that if they did have to do so, they can get back on track—and as employers we can help.”