Fidelity Study Shows Americans Made ‘Downright Ugly’ Financial Decisions During Pandemic

by Michael Freeman
(Photo by Alex Tai/SOPA Images/LightRocket via Getty Images)

The pandemic has been rough for everyone over the past few years. On top of the world slowing to a crawl, many people experienced depression and financial hardship. On the subject of the latter, Fidelity Investments shared a study recently about the pandemic. Putting it bluntly, they say Americans made “downright ugly” financial decisions.

What we Learned

  • Fidelity’s retirement study reports Americans made questionable decisions during the pandemic.
  • Many cashed in their retirement plans and others aren’t saving until things get back to “normal.”
  • Fidelity’s vice president of retirement warns to avoid taking from retirement plans unless absolutely necessary.
  • Though Americans are beginning to save again, inflation is another concern scaring them.

Fidelity’s 2022 State of Retirement Planning study states a staggering amount of people either halted retirement savings during this time or cashed them out entirely. Making use of their nest eggs often came from COVID-related financial strain. It also occurred from leaving their jobs during the “Great Resignation” in 2021. For those who don’t know, this was when hordes of people quit their jobs, primarily in the United States.

Fox Business discussed the study’s results, stating more than 40 percent of the general population put retirement planning on hold during the pandemic. Further, this number climbs even higher for younger investors, reaching 55 percent among those ages 18-35. Respondents often said they didn’t see the point in saving since things weren’t “normal” yet. On that note, of the people who quit their jobs, 21 percent cashed out their retirement savings.

Rita Assaf, vice president of retirement at Fidelity, said so many people doing so is alarming. “The fact that so many people who left their jobs as a result of the Great Resignation also cashed out of their 401(k)s may be cause for concern,” Assaf said. “Taking money out of your retirement accounts completely should be avoided unless the immediate need is critical and there are no other options, not only because of the tax implications but also due to the impact on your retirement nest egg.”

Inflation Emerges as a New Fear for Investors

Though Infidelity’s study disclosed many Americans made poor financial decisions during the pandemic, the majority of their respondents believe the worst is behind us. Nonetheless, another fear is giving them pause regarding investments, and that happens to be high inflation.

Specifically, Infidelity reports a whopping 71 percent of Americans are concerned about inflation’s impact upon their retirement. Of that percentage, nearly one-third don’t know how to maintain their retirement savings. Luckily, Assaf believes the concerns aren’t as serious as you might think.

“One piece of advice for retirement savers and inflation is to not worry too much,” Assaf said. “Based on what we know about retirees and their satisfaction once they get to retirement, most aren’t spending as much as they anticipated and yet they’re feeling pretty good about where they are.”

In short, she says if you have a good retirement plan in place, don’t panic and you should be fine despite rising prices.