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Don't treat your 401(k) plan like it's an ATM: Edelman Financial Engines EVP

Kelly O’Donnell, Edelman Financial Engines Executive Vice President joins the On the Move panel to discuss the impact of COVID-19 on their 401 (k) funds.

Video Transcript

JULIE HYMAN: During this pandemic, a lot of different people have made a lot of different choices in order to try to preserve money. Some of those choices, though, they have come to regret. And in fact, a new survey out from Edelman Financial Engines found that half of US workers took financially harmful actions during the pandemic.

To talk more about this, we're joined by Kelly O'Donnell, Edelman Financial Engines executive vice president. [INAUDIBLE] part of our Funding Our Future segment, which is a special partnership between Yahoo Finance and the Funding Our Future Group.

So, Kelly, what does financially harmful mean in this [INAUDIBLE] when we're talking about actions that people took.

KELLY O'DONNELL: Yes, thanks, Julie. What we're seeing is people are really taking a lot of actions related to their retirement savings, which is very concerning. We've seen that nearly 45% of workers either have or are planning to take funds from their retirement account. And what we know is that people aren't getting the help they need.

Over 80% of workers said, had they talked to a financial advisor before making that decision, they may have made a different choice. So as the largest independent investment advisor, we know that we've had, during the pandemic, many retirement investors coming to us, asking for more financial help trying to navigate the uncertainty and the volatility of the pandemic.

ADAM SHAPIRO: So what would you advise a client who is in dire straits-- has to pay the mortgage, has to feed the kids-- and can't worry about 15 to 20 years down the road, has to deal with now? Because you're supposed to raid your savings. And if you don't have cash savings, next stop is the 401(k). So what would you advise them?

KELLY O'DONNELL: Yeah, it's great. And we do understand that there's a lot of financial hardship going on for many Americans right now. We still don't recommend taking retirement savings out early. We don't want to have people thinking of their 401(k) like an ATM. What we do recommend is working with a financial advisor to help make an informed decision.

This is-- and a financial advisor can help someone sit down, look at other sources of income, look at ways to reduce spending, and hopefully not compromise your long-term retirement goals.

JULIE HYMAN: Well, Kelly, I guess the issue is, if you don't have enough money to pay the bills, you don't have enough money to pay a financial advisor, right? So are there other resources that are available to people that they can look to, to try to help them with their decision making?

KELLY O'DONNELL: Yeah, what we saw was that 85% of workers would like to see their employers offering financial help as an employee benefit. And so this is really the first place that I would be telling employees to go, is to go talk to your employers.

More and more employers are seeing the impact of the financial stress on their employees. And so, more and more are offering this as a financial benefit. So many times, you can receive guidance at no cost.

ADAM SHAPIRO: Are you able to name employers who might be doing that? Because this is a big issue. And I know internally, we have people asking questions here at our shop about, could there be assistance for those who are strapped right now, given the current working circumstances.

KELLY O'DONNELL: Yeah, so at Edelman Financial Engines, we work with more than 850 employers across the country, representing millions of participants. So I'm--

ADAM SHAPIRO: Are you allowed to name them?

KELLY O'DONNELL: Yes, Boeing, Delta, Ford. I'm hopeful that many of your listeners are able to receive advice by going to their HR department and asking if the advice is available. And what we're seeing during the pandemic, again, is more and more employers are focused on the employees' financial well-being. So we're hopeful that this trend will continue.