We’ve all seen the headlines this morning about the unprecedented 20.5 million American jobs that were lost in April leading to an unemployment rate of 14.7%. The economic consequences related to the virus are beginning to pile up. According to a Bankrate survey, most consumers that have a mortgage or auto loan fear that they will miss a payment in the next 3 months. 54% of American consumers with a mortgage and/or auto loan are at least somewhat concerned about their ability to pay.
Not surprisingly, the ability to pay differs by age group, as only 43% of Baby Boomers are concerned, while 56% of Gen Xers, 65% of older Millennials, and 79% of those 30 and younger are in a precarious position at this time. I fear that this situation will cause many American savers to forgo contributions into their retirement accounts, or worse, force those with retirement accounts to take loans or premature withdrawals.
These actions could profoundly impact their ability later in life to retire. It once again highlights for me why it is important for American workers to participate in a traditional DB plan as opposed to a mostly self-funded (many companies have already suspended contributions), self-managed “retirement” vehicle such as a 401(k).