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208 The Impact of the COVID-19 Labor Market Shock on Withdrawals From Retirement Accounts: Understanding the Moderating Role of Financial Knowledge
Short Description
We explored the effects of COVID-19 labor market shocks and COVID-19 diagnoses on the likelihood of hardship withdrawals or plan loans from retirement accounts. Such withdrawals could substantially reduce the level of living of workers in retirement. We found that over 16% of working age respondents took a hardship withdrawal or plan loan. Those reporting a COVID-19 labor market shock had 3.8 times higher odds of a hardship withdrawal than otherwise comparable respondents who did not have a shock. We also found that the impact of a COVID-19 related labor shock was moderated by the objective and subjective financial knowledge of individuals, implying a potential role of financial education in alleviating the risks to retirement. The most salient result is that respondents with financial knowledge overconfidence were much more likely to take a plan loan or a hardship withdrawal than those with appropriate or low levels of confidence. We also found that in addition to the positive impact of a labor shock on the chance of withdrawals, those who reported having tested positive for COVID-19 had odds of a hardship withdrawal as much as 2.1 times as high as the odds for otherwise comparable respondents who did not test positive.
Type of presentation
Accepted Poster Presentation