Here’s how COVID-19 has impacted retirement savings
It has been well documented that COVID-19 has wreaked havoc on both the U.S. and global economies during the course of the last 12 months. From sky-high unemployment rates to the shuttering of businesses to retirement savings and wild swings in the stock market, the virus has impacted each and every sector of the economy.
With so much attention being paid to the daily toll the ongoing pandemic has had on businesses, workers, and their finances, less attention has been paid to the long-term effects of COVID-19 on American’s nest eggs and retirement goals.
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Rather than surveying workers directly to learn their opinions regarding how COVID-19 has impacted their retirement savings and retirement plans, we at LT Trust wanted to go directly to the data.
By reviewing the 401K’s of 59,000 American workers across all 50 states during 2020, we discovered that those who were fortunate enough to remain employed during this historic economic downturn were actually able to save more than they had in previous, non-pandemic years that saw the economy fare far better overall. In fact, the average retirement contributions and balances for employees in all 50 states were up from 2019 levels.
Overall, we found that:
• Between 2019 and 2020, the average 401K balance increased by 30.3 percent
• Between 2019 and 2020, the average 401K employee contribution increased by 6.12 percent
• Utah saw the largest average balance increase at 47.2 percent, while North Dakota saw the lowest uptick at 11.5 percent
• Despite growth across the board, the 401(k) contributions of males increased 3 percent more than their female counterparts
• Employees aged 21-30 saw the largest average balance increase, at 77 percent.
While there is no question that millions of Americans–from business owners and their employees to investors and retirees–have been negatively impacted by the COVID-era economy, 401Ks were, by and large able to weather the 2020 storm. This is likely due to a combination of economic anxieties and fears resulting in larger employee contributions and an increase in disposable income from the shift to remote work (IE fewer trips to the gas station, not as many to-go coffees and restaurant lunches, and far fewer post-work trips for drinks) and the widespread shut downs that left many with nothing to do but stay at home.
As more and more cities, states, and workplaces ease restrictions and open up in 2021, it is worth monitoring whether or not these super saver trends continue or if contributions and balances decrease from 2020.
Top 25 401(k) balance increases by state
The average 401(k) balance increased by 30% in 2020