Though there are still many people not saving for retirement in the U.S., the nation's defined contribution retirement system has held up reasonably well during the COVID-19 pandemic, speakers said Thursday on a webinar hosted by Center for Retirement Initiatives at Georgetown University.
David Musto, president and CEO at Ascensus, said there hasn't been an uptick in retirement plan terminations in recent months, which could be due to the cost and complexity of going that route.
But there has been an 8.6% decrease in the employees contributing to retirement accounts since the pandemic began, Mr. Musto said, though he did not specify a time frame. He added that overall retirement plan participation levels have gone down as a function of people losing jobs, being furloughed or decreasing their contribution rates to zero.
"While these impacts are certainly concerning in the near term and potentially over the long term, the good news is we have seen through past financial crises that savings rates typically do get readjusted to the positive anywhere on the order of 3% to 10% over historical levels, but it remains to be seen how we'll navigate through and come out of this specific period," Mr. Musto said.
Moreover, hardship withdrawals are up, but since March, loan activity has been tracking below historical norms, Mr. Musto said. "We'd like to think that years of workplace education around the importance of saving and the importance of not tapping retirement accounts ... is having an effect here and that people truly are reaching for withdrawals and loans as a last resort measure rather than a first resort," he said.
