About 30 million Americans tapped into their retirement savings for an emergency within the past year, according to a new report from Bankrate.com. And the numbers tell a “troubling” story for older adults nearing retirement.
Although Americans are increasingly upbeat about their personal finances, optimism for one’s financial situation diminishes with age, according to the September reading of Bankrate’s Financial Security Index.
In September, the Index hit its strongest reading since June at 102.6. While the measure showed improvement in all five components (job security, savings, debt, net worth and overall financial situation), more than a quarter (26%) of those nearing retirement age (50-64) said their situation is worse now than it was last year.
This could largely be due to emergency expenses cutting into retirement savings, which 17% of 50-64 year-olds said happened over the past year.
This is a “troubling” development for those over age 50, as these years are the home stretch in preparing for retirement, says Bankrate.com Chief Financial Analyst Greg McBride.
“Using retirement savings to cover an emergency is a permanent setback to retirement planning, with the possibility of taxable distributions, early withdrawal penalties, loss of tax efficiency, and the inability to replace withdrawn funds in future years,” McBride said in a written statement.
People with higher incomes were less likely to dip into their nest egg, with more than 90% of people earning $75,000 or more saying they haven’t touched their retirement savings.
Another key highlight of the survey revealed that people living in the South were more than twice as likely than people in the West to have used their retirement savings for an emergency.
The Bankrate.com survey was conducted by Princeton Survey Research Associates International, which obtained phone interviews with 1,004 adults living in the continental U.S. between September 3-6.
Written by Jason Oliva