Betterment and Vanguard find workers who tapped their retirement savings in 2022


About a quarter of full-time workers have dipped into their retirement savings to pay for short-term expenses this year, according to a nationwide survey by Betterment at Work.

Betterment, a financial benefits provider and 401(k), reported last week that 28% of 1,000 workers surveyed said they dipped into retirement savings amid record high inflation and prolonged volatility. of the market. The New York-based company said workers’ confidence in their own financial stability had dropped since 2021, with 40% now saying they were financially stable, down 9% from last year.

“Many workers are grappling with new challenges and financial anxiety, which means financial wellness benefits have become more important than ever,” Christian Carlislevice president and general manager of Betterment at Work, said in a press release.

The Betterment research follows a Vanguard report in November that found the share of workers withdrawing money from employer pension plans is increasing for loans, hardship withdrawals and hardship withdrawals. Hardship withdrawals, which are subject to income tax and a possible 10% early withdrawal penalty, have reached their highest level since Vanguard began tracking them in 2004.

According to Betterment, the decision by workers to dip into their retirement savings is a concrete sign of the financial anxiety felt by the American workforce due to high inflation, market volatility and rumors of a recession. The benefits provider said the majority (71%) of employees are worried about their finances, and an additional 54% say that anxiety has made it difficult to concentrate at work.

Employees are looking for support, with 68% saying financial wellness benefits are more important to them now than a year ago. Coveted perks include a health savings account, an employer-sponsored emergency fund and student loan offers, according to the research.

An arms race for profits

These types of financial benefits are especially important for small employers, says Edward Gottfried, director of product management at Betterment, because fewer small businesses offer 401(k) savings plans and wellness tools. The silver lining, he says, is that there was “a kind of healthy arms race” leading to the creation of affordable and accessible financial benefits programs during the Great Resignation.

“The last two years have been a bit wild in terms of deal growth [among small employers]“Gottfried told PLANADVISER. “Small employers realized they had to offer benefits to be competitive with their peers.

There has been competition for workers in both skilled jobs and entry-level positions, Gottfried says. Pension advisors and financial advisors have the opportunity to ensure that employers are aware of the full range of retirement and welfare benefits available to them.

He says Betterment’s market differentiation is a one-stop-shop for employees, including retirement planning, advice on paying student loans and safe ways to start emergency savings.

An emergency savings plan may help some of the growing number of Americans who report being more financially risk averse than a year ago. In a survey in early December, insurance company F&G found that 78% of Americans said they had become more financially risk averse, up from 69% in 2021. The Des Moines, Wash.-based insurer ‘Iowa, said of 1,691 people surveyed, 67% feel like their financial safety net has been taken away from them in 2022, compared to 47% of people who said so a year ago.

However, not all discoveries have been bleak. In other December research, Bank of America found that among its customers, median household savings and check balances remain well above pre-pandemic 2019 levels at all income levels. While the bank has seen an increase in “pads” used due to high inflation and housing costs, most consumers are not spending more on credit compared to debit card usage in 2019.

Whether workers are cash-strapped or not, advisors can have more leeway to talk to companies about their retirement and financial benefits. Just under half (45%) of workers believe their employer is committed to supporting their financial well-being, according to the Betterment survey.

Leave a Reply