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Employees Dipping into Retirement Savings


A man and a child sitting at a table with papers and a laptop.


​Financial woes are continuing to impact employees, with scores of workers dipping into their retirement accounts and many more worried about their expenses, savings and financial stress.

A new survey from Betterment at Work, a New York City-based financial services firm, finds that employee financial health is on a downward trend, with 40 percent of employees rating themselves as financially stable, a 9 percent drop from last year.

Retirement accounts have also taken a hit: Three-quarters of employees (75 percent) say market volatility has impacted their retirement account balances, and more than one-quarter (28 percent) dipped into their retirement savings to pay for short-term expenses this year, according to the report, which surveyed 1,000 full-time U.S. employees.

"This is a significant and worrisome number," said Kristen Carlisle, general manager at Betterment at Work. "Retirement savings should be tapped only in dire scenarios, and withdrawing before the age of 65 can incur steep financial penalties."

Inflation, unsurprisingly, is the primary culprit driving employees to tap into their post-work savings, with 64 percent of respondents saying they have faced higher costs of living and 88 percent saying inflation and rising costs of living have notably increased their financial anxiety this year. Carlisle added that there are several additional macro environment trends that have emerged in the wake of the pandemic that are contributing to financial issues for many Americans. Those include stock market volatility along with rent increases and new-home costs as both the rental and housing markets spiked in 2022, she said.

The Betterment findings echo the results of other surveys: Previous research has shown that inflation is having a big impact on employees' finances and retirement. Third-quarter results from Minneapolis-based insurance firm Allianz Life, for instance, recently found that managing rising inflation is causing 54 percent of Americans to reduce or stop socking away retirement savings. That survey also found that more than 4 in 10 Americans (43 percent) say they have had to dip into their retirement savings because of rising inflation.

"Inflation is not going away tomorrow," said Kelly LaVigne, vice president of consumer insights at Allianz Life. "While we all hope that the pace of inflation will slow, it will take time to moderate. Consumers need to prepare themselves by talking to a financial professional and incorporating some ways to help fight the effects of inflation into their portfolio so that long-term inflation doesn't affect retirement."

As a result, employees also are looking for more help from their employers when it comes to retirement and financial benefits. The Betterment survey, for instance, found that a 401(k) offering and 401(k) match remain the two most highly sought-after financial benefits. However, only 52 percent of employees surveyed have access to a 401(k)—a number that drops to 39 percent for workers at small businesses. And about 7 in 10 workers indicated that financial wellness benefits are more important to them now than they were a year ago. Yet just under half of employees (45 percent) feel their employer is committed to supporting their financial wellness.

The survey results come as the collection of retirement provisions known as Secure 2.0—which builds on the original SECURE (Setting Every Community Up for Retirement Enhancement) Act and aims to improve retirement savings opportunities for workers—was just passed by Congress as part of the $1.7 trillion government spending bill for 2023. President Joe Biden signed the bill into law on Dec. 29.

"As we've seen over the past few months, financial situations can change fairly quickly. As such, HR and benefits managers should always be considering whether or not their benefits are meeting the rapidly evolving needs of their employee base," Carlisle said.

Given the rise in individuals feeling the financial squeeze and currently dipping into their retirement savings, she said, benefits managers need to ask themselves whether their benefits are meeting this macroeconomic moment and if they have the elasticity to be effective beyond what people are dealing with today.

"Employers don't need to offer every benefit on the board, but it's important to pay attention to the major shift happening in the workforce," she said. "There are emerging benefits that speak to modern needs, such as managing student debt or creating emergency savings, which can help individuals weather a complex financial climate. I encourage benefits managers to remember that one size does not fit all. The risk is not just losing talent to those who offer more-competitive packages but an inability to attract talent in the future."

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