Researchers recently sought to discover the retirement preparedness of people who were underemployed or unemployed. Their survey showed that more than 60 percent of displaced workers had very little or no confidence about their prospects for retirement. Although signs point to the start of an economic recovery and a smaller unemployment rate, millions of people in America are still underemployed or unemployed. Many workers who had started saving for retirement had to use their savings to survive after losing their jobs or having their hours cut.
Experts say that many Americans are overlooking how important it is to seek good retirement benefits programs while they are searching for employment. Researchers believe it is important for people to be aware of these issues and be able to identify helpful opportunities that will assist them in rebuilding their retirement savings. Nearly 60 percent of displaced workers reported having a type of retirement savings account. Although many seem aware of penalties and taxes in applicable situations, their financial stresses are high enough that more than 30 percent of these workers took withdrawals from their accounts. Experts say that employment gaps have very detrimental effects on long-term retirement savings plans. This is especially true after people have been out of work for more than one year.
More than 40 percent of workers who were displaced for more than one year took a withdrawal. However, less than 25 percent of workers who were displaced for less than one year took a withdrawal. Of all the previous 401(k) participants who were surveyed, almost 45 percent said they took withdrawals from those accounts. This included more than 50 percent of the unemployed participants and nearly 40 percent of the underemployed participants. From all the displaced workers surveyed, the average household retirement savings was about $7,500. People who were 60 years of age or older saved the most on average at $93,000. However, people under this age group had saved less than $20,000 on average. People who were between the ages of 40 and 50 had the highest percentage of retirement savings withdrawals.
Experts say that just more than 15 percent of people responded that generous retirement benefits were important to them when searching for jobs. Competitive pay, job stability and easy commuting were all priorities that ranked twice as high or more in importance for displaced workers seeking jobs. This has led experts to realize that these individuals were not placing enough importance on retirement savings.
The good news is that there are ways to start rebuilding a damaged nest egg. Experts recommend that people budget their money and look for ways to cut living expenses, which will leave more money to put toward savings. They also say that it is important to look for job opportunities as quickly as possible. While it is best to aim for a job with good retirement benefits, it is possible to work at another job until a better offer is found. Another option is to take on a part-time job. Taking free or affordable classes to sharpen existing skills or learn new ones can also help.
For employers, experts recommend providing counseling and transition training to workers who are laid off. It is also important to offer an attractive retirement savings plan. In addition to keeping workers happy, it is a valuable tool for attracting talented workers in the first place. To learn more about retirement savings plans, discuss options available to effectively establish your own pension and a life time income stream, please give me a call.
Bob Adams is president of A SafeHarbor, a firm specializing in assisting families in having a calm retirement when faced with stormy financial waters. Visit aSafeHarbor.com or call 407 644-6646 for questions and assistance.