So Far, So Good

Though I’m naturally inclined to look for the good in things, you can put me in the category of folks concerned about throwing wide open pre-retirement access to retirement accounts. 

 

It has been a concern of mine since the first time we did so (Hurricane Katrina), then mostly because it occurred to me that once you’ve opened that door, it gets more difficult not to do it for the next disaster. And, let’s face it—if your house burns down all by itself, it’s no less a financial hardship to you as an individual than when wildfires decimate an entire community. Still, it’s hard to question the desire—the need—to allow those in desperate financial straits to tap all available financial resources to restore their lives, even at the risk of placing their eventual retirement at risk. 

 

This time seems different, of course. The impact, both physical and financial is more than a community, a state, or a region—it’s literally sweeping across the nation. However quickly different parts of the nation’s businesses come back online, there’s little question that the restart will be measured, at best—and likely uneven. 

 

That said, the word coming back from those on the front lines is encouraging. Lots of inquiries, as you would expect—but little action. Many advisors tell me they are explaining options (to both plan sponsors and participants), but with a cautionary note—and one that, writ large, anyway—seems to be taken to heart. 

 

While some trading volumes are higher, most participants appear to be riding this out. Nearly half (47.4%) of some 150 plan sponsor respondents indicated they are still deciding which of the CARES Act provisions to implement, according to a survey by the Plan Sponsor Council of America (PSCA), part of the American Retirement Association. 

And while more than 20% of large organizations indicated they are suspending matching contributions (just 3.6% of small plans have moved to do so), that’s about what happened in the wake of the 2008-2009 financial crisis—and, for the very most part, those came back (some came back increased, in fact).

 

Make no mistake—it’s early yet. More than 22 million Americans have already filed for unemployment benefits, and that can hardly be the end of it. Those 200,000 plans potentially at risk of termination? They don’t (yet) have the funding relief they will doubtless need to sustain those programs. That remains a concern—because if the retirement savings plans go away, so will the retirement savings.   

 

And yet, for the moment, anyway, the tide of requests haven’t hit those floodgates. Though they may well in the weeks ahead. 

 

But for now, so far, so good…