Many companies in California and across the country were hit hard by government-mandated lockdowns. Businesses were shuttered and employees lost jobs and their ability to pay their bills. The impact has been horrible. This week we tackle a question from a local company…
Question: Erick, we weren’t able to keep everyone employed during the pandemic, even though the business has continued with a skeleton crew. Unfortunately, we don’t expect to be in a position to rehire everyone for some time. Some of our employees are telling us that they are less confident now that they will be able to retire on time. Is that what you’re hearing from other companies?
Answer: Yes, retirement confidence has taken a hit for many because of repercussions of the pandemic. A January 7, 2021, article on Kiplinger’s summarized a poll they conducted with Personal Capital, a wealth management firm. In that poll, 43% reported less confidence in their ability to retire comfortably as a result of COVID-19. Forty percent said their confidence level has not changed, though. What are people planning to do about it? About one-third of them (34%) said their plans have not changed. Thirty-five percent said they expect to work longer, 34% plan to save more, and 20% said they will revise their activities and/or travel in retirement so it will be less costly. The poll shows that just over 34% said they took a distribution from a retirement account and 27.4% took a loan. Nearly one-third (32%) said their withdrawal was between $75,000 and $100,000, and 31% borrowed in that same range.
So what can we do to help?
- Engagement – Let’s reach out to them and let them know we understand the challenge. We can listen. Then we can offer some practical advice and guidance on what they can do right now to move in a positive direction.
- Education – Let’s deliver some Lunch & Learns about Financial Wellness and offer some tips they can follow.
- Let’s review the 401k and find ways to improve the current offering and maybe even some ways to lower fees.
Keep in mind: Lower contribution rates could cause you to fail annual plan testing and result in some employees getting a refund of excess contributions. That could impact their retirement planning too.
Ready to discuss your retirement plan with a 401(k) Advisor?
For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.