Meager savings led workers to tap retirement accounts, survey finds

American workers who exhausted their meager savings because they lost their jobs or experienced a drop in income as a result of the COVID-19 pandemic were at least twice as likely to take money from their qualified retirement savings accounts as those who weren’t affected, a new study reports.

The Secure Retirement Institute, the education and research effort of the financial services trade group LIMRA, surveyed more than 1,400 U.S. non-retired households with qualified retirement savings accounts and found almost half (49%) had experienced a reduction in work income through job loss, a decrease in their hours and/or a pay cut. These households were more likely than those not directly affected by the pandemic to access their retirement plan balances, the study found.

A general lack of emergency savings was a key reason for accessing qualified retirement accounts, SRI found.

A quarter of workers (26%) said their emergency savings would cover less than one month’s expenses; nearly half (48%) reported having only enough emergency savings to cover three months’ expenses or less.

[More: Emergency savings: The next workplace benefit]

“The lack of emergency funds and the staggering job loss that occurred over the past few months will have long-term ramifications on retirement security for many Americans,” said Matthew Drinkwater, SRI’s research director.

[More: Few use CARES Act to tap retirement savings]