Repairing the Damaged Nest Egg: How to Improve the Retirement Outlook of the Unemployed and Underemployed, as part of the 14th Annual Transamerica Retirement Survey, assesses the retirement readiness of the unemployed and underemployed and identifies opportunities to help improve their retirement outlook.
A Portrait of the Unemployed and Underemployed
In 2013, the survey found the unemployed (54 percent) outnumber the underemployed (46 percent) among those who have been displaced for less than a year. For those displaced for more than a year, the underemployed (59 percent) outnumber the unemployed (41 percent). Alarmingly, nearly one in five (19 percent) who have been unemployed for more than one year indicated they had either dropped out of the workforce completely or retired early because they were unable to find work.
Displaced workers over the age of 40 have been hit particularly hard and represent nearly two-thirds (64 percent) of the un/underemployed. Worse, most have been un/underemployed for more than a year. A closer examination of the data reveals that those in their:
• Forties are more likely to be underemployed (57 percent) than unemployed (43 percent)
• Fifties are more likely to be unemployed (57 percent) than underemployed (43 percent)
• Sixties are at risk of being forced into retirement sooner than expected. Seventy-seven percent of them are unemployed and 76 percent have been un/underemployed for a year or more
Displaced workers in their Twenties and Thirties are more likely to be underemployed (74 percent) than unemployed (26 percent). Their greatest challenge is to find more meaningful employment so they can start building their retirement savings as soon as possible.
Among the un/underemployed, those with only a high school education or some college (60 percent) greatly outnumber those with a college degree (34 percent).
The Damaged Nest Egg: Un/Underemployment Results in Withdrawals from Retirement Funds
A sizeable majority of the un/underemployed (62 percent) are not too/not at all confident that they will be able to retire comfortably. The lack of confidence is more pronounced among those who have been un/underemployed for a year or more (68 percent).
Un/underemployment often results in withdrawals from retirement accounts or “leakage.” Fifty-nine percent of the un/underemployed reported having retirement savings account(s). When asked about sources of funds used since becoming un/underemployed, more than one-third (36 percent) said that they have taken a withdrawal from their account(s), including:
- Thirty-five percent of the unemployed; 36 percent of the underemployed
- Twenty-three percent who have been un/underemployed less than one year; 42 percent who havebeen un/underemployed for a year or more
Moreover, among those who participated in a 401(k) or similar plan at their most recent employer, many (43 percent) have taken withdrawal, including:
- Fifty-three percent of the unemployed; 38 percent of the underemployed
- Thirty-five percent who have been un/underemployed for less than a year; 47 percent of have been un/underemployed for a year or more
In both scenarios, those who have been un/underemployed for a year or more are more likely to have taken a withdrawal, which further illustrates the negative effects of the passage of time.
Notably, this leakage from retirement accounts was more likely out of necessity versus a lack of awareness of the consequences: 80 percent of those with a retirement account said they were familiar with the taxes and penalties associated with taking an early withdrawal.
Other frequently cited sources of funds used by all un/underemployed include: personal savings (55 percent), unemployment benefits (43 percent), and credit cards (36 percent).
Chosen excerpts by Job Market Monitor. Read the whole story at