Bulletin
Investor Alert

London Markets Close in:

Brett Arends's ROI

Aug. 7, 2020, 11:02 a.m. EDT

COVID-19’s next threat to your 401(k)

The crisis could blow a $60 billion hole in retirement plans

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

By Brett Arends, MarketWatch


Photo by Doug Mills-Pool/Getty Images
Deborah Birx and press secretary Kayleigh McEnany practicing social distance in the White House

It is insane that our tax-deferred retirement plans depend on our employers, and we’ve got yet more reasons to prove it.

Sixty billion of them.

That’s how many dollars that U.S. workers are likely to lose out of their retirement savings because companies are slashing their 401(k) matching contributions.

No, really. And half those losses are falling on millennials.

The calculations come from MagnifyMoney.com, and they aren’t a stretch.

Sixteen percent of U.S. employers told researchers they planned to suspend the company match for the next 12 months as a result of the lockdown.

Click to Play

80% of older Americans can't afford to retire - COVID-19 isn't helping

More than 25 million older Americans are financially insecure - living at or below the federal poverty level. We spoke with a few senior citizens who shared about their economic challenges.

Based on the typical matches paid, that works out at around $13 billion in missed contributions.

The average match lost would be about $1,100, and about 11.4 million workers would be affected, they estimate.

And when you look at the ages of workers, and apply a typical annual return of 6% on investments, that comes to a $59 billion hole in retirement savings.

Millennials, the bulk of whom are in their 20s and 30s, are paid less on average than baby boomer and Generation X workers. But that money would have much longer to compound.

Losing a $1,000 company match at age 25 is losing more than $10,000 from your pension at age 65.

Actually, MagnifyMoney is understating the costs because they are looking at how much you lose by age 65. But we’ll need those investments and savings until the day we die, which for growing numbers of people means into their 80s and even 90s.

They’re also not counting any cost to long-term economic growth from the pandemic, the lockdowns and the aftermath.

Add all this to the growing costs, social and economic, of the lockdowns. It will be fascinating to see the final tally. We won’t know for a long time how many lives we managed to extend, and for how long, and how much we lost doing so.

Page 1 Page 2
This Story has 0 Comments
Be the first to comment
More News In
Retirement

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.