PLANSPONSOR - April/May 2021 - 13

The Financial Wake of COVID-19
NEARLY seven in 10 (68%) individuals
who took a loan or withdrawal from their
retirement plan or borrowed from a traditional
lender due to COVID-19 agreed or
strongly agreed that they are in a better
place financially because of that action,
according to a Voya Financial survey.
However, nearly half (47%) said
they took more money than they needed,
and 59% reported wishing they had
consulted a financial professional first.
Two-thirds (65%) said borrowing from
their account has put them behind in
saving for retirement.
In December, recordkeepers reported
that they saw low uptake in general for
coronavirus-related distributions (CRDs)
and loans since the passage of the
Coronavirus Aid, Relief and Economic
Security (CARES) Act, last March. While
some savers reported lower retirement
confidence earlier this current year,
according to researchers at the Center for
Retirement Research (CRR) at Boston
College, the pandemic has not affected
retirement savings overall, as no mass
withdrawals from accounts took place, and
the stock market experienced an upswing
since the major drop last March.
Participants Are Confident
The Employee Benefit Research Institute
(EBRI) has said the effect of COVID-19
on retirement is " manageable. " And, in
its 2021 Retirement Confidence Survey,
fielded in January, 80% of retirees said they
were confident they will live comfortably
throughout retirement, up from the 76%
who held that view last year. It also noted
that 72% of workers are confident they can
retire comfortably, up 3 percentage points
from the previous January.
" This past year has especially highlighted
that individuals need 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. It's also important
for individuals to know that if they did
have to do so, they can get back on track, "
says Heather Lavallee, CEO of wealth
solutions, Voya Financial.
" We're working with many of our
clients to help them understand ways they
can play a role in helping their employees
rebuild their retirement savings and
become better prepared for potential
future short-term financial needs, " she
says. " This includes solutions and options
for helping employees build their emergency
savings both inside and outside of a
retirement plan. And, with many possibly
deciding how best to utilize a stimulus
payment and/or a tax refund, now is an
opportune time to help individuals address
their short- and long-term savings needs. "
According to Voya, many individuals
have already taken actions to get back on
track financially. The results of the survey
also revealed that nearly four in 10 (38%)
Americans are reducing overall expenses,
and more than one-quarter (29%) are
re-evaluating their monthly budget.
-Rebecca Moore
Near-Retirees Baffled by
Social Security Benefits
THIRTY-FIVE percent of near-retirees,
those between ages 55 and 65, failed a
basic knowledge quiz about Social Security
benefits that MassMutual administered.
Another 18% earned a " D " on the graded
quiz, and a mere 3% got an A+, having
answered all 12 true/false statements
correctly. Survey results also found that
26% of respondents between 60 and 65
did not know their full retirement age.
On the bright side, however, 83%
said they understood the consequences
of taking Social Security benefits before
full retirement age, and 94% said they
realized doing so would reduce their
payments. Another 86% knew that if
they began taking their benefits before
full retirement age and continued to
work, their payments could be reduced,
based on their earnings.
" Today, Social Security is the primary
guaranteed retirement income stream,
besides pensions and annuities, " says Paul
Lapiana, head of MassMutual U.S. product.
" For those looking to maximize their
retirement income stream, one option is to
depend on an annuity to fill the gap and to
hold off filing for Social Security to grow
delayed retirement credits and receive the
largest possible benefit for life. "
During the COVID-19 pandemic,
people expressed interest in a variety of
Social Security topics, including survivor
benefits. But even with the greater interest,
22% thought that if their spouse died, they
could receive the deceased's full benefits
along with their own, which is incorrect.
Many near-retirees also wondered
about the impact of a divorce on Social
Security benefits. Thirty percent were
unaware that a divorced person could be
able to collect Social Security benefits
based on an ex-spouse's earnings history.
" As with most things in life, knowledge
is power, and choices should be
made on purpose and not by accident, "
says David Freitag, a financial planning
consultant with MassMutual. " Make the
wrong choice, and you'll be leaving money
on the table-for the rest of your life. "
The survey was conducted in March
among 1,500 Americans, 55 through 65,
who have yet to file for Social Security
benefits. -PS
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