The economic crisis we’ve faced over the past year resulted in negative outcomes for many businesses and families. But as we recover, many are realizing they didn’t suffer as greatly as feared.
Some of those newly created millionaires can thank markets that came roaring back from massive lows a year ago. After weeks of deep concern during a national shutdown, the markets, which tend to be forward-looking, saw a recovery on the horizon.
Market swings aren’t the only factor contributing to financial success, however It appears that our behaviors may have changed as a result of this crisis as well.I think back to the Great Depression, when Americans learned to “Waste not, want not,” and to “Stop replacing, start fixing.” Those adages became commonplace during the Great Depression, when penny-pinching and self-sufficiency weren’t just life choices: they were a way to survive.
In much the same way society corrected its behavior after the Great Depression, the pandemic may have helped change the way we approach savings. About 17% of those with 401(k) accounts increased their contributions during the pandemic.
It’s a trend that was growing even before the health crisis. In 2018, average 401(k) savings increased to 7.7% of pay, up from 6.8% in 2016.
While savers have shown more savvy saving behavior through the past few years, they’ve also demonstrated restraint: despite conditions which could have led to a panic, the percentage of workers who made a withdrawal from their 401(k) account, including for hardship reasons, fell to 2.4% from over six percent at the end of 2020.
A million dollars is a laudable savings threshold. If you’ve passed that milestone and are wondering if you have enough to maintain your lifestyle, you’re not alone. Research indicates many folks post-pandemic are considering early retirement, which naturally leads to concerns about managing future costs like taxes and healthcare.
You may have reached a million in savings without much help, but retirement often requires additional advice. Find an advisor you can trust to discuss how you want to spend your retirement.