Assessing the effects of the CARES Act on 401(k) savings

July 17, 2020

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The Coronavirus Aid, Relief, and Economic Security (CARES) Act gives retirement savers added flexibility to access their 401(k) savings. And while this flexibility is helpful to many workers, it's encouraging that the vast majority have not needed to access their retirement savings and are staying the course on their journey to retirement.

Less than 2% of participants had withdrawn assets via coronavirus-related distributions (CRDs) as of May 31, according to How America Saves 2020: The CARES Act.

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The decision to avoid tapping into retirement savings is consistent with what we have seen from other participant data. For example, the rate of retirement plan loans and withdrawals has remained relatively low and has been generally steady over the last decade, according to How America Saves 2020.

That said, participants who access their retirement assets early may experience a shortfall upon reaching retirement.

Regarding CARES Act distributions, the median amount was $10,413, the median age was 43, and the median income was about $62,000. Assuming a real investment return of 4%, the median participant distribution could grow to approximately $25,000 over the next 24 years, according to How America Saves 2020: The CARES Act. For the typical participant, this would represent the future financial impact at retirement. But it's a shortfall that can be made up with marginal increases to savings and plenty of time to retirement. That's where automatic solutions can help.

Automatic solutions continue to play an important role in retirement plans. In addition to the many savings and portfolio construction benefits of automatic enrollment, this plan design has provided many employees with an additional source of emergency money. And assuming participant financial situations improve, automatic solutions can serve as an integral plan feature to help participants regain their footing on their journey to a successful retirement.

In addition to this analysis of the CARES Act, visit our How America Saves page to access:

  • How America Saves 2020. A comprehensive analysis of the retirement saving behavior of 5 million participants in defined contribution plans recordkept by Vanguard as of December 31, 2019.
  • How America Saves 2020: Insights to Action. Highlights six key themes from How America Saves 2020 data and recommends actions plan sponsors can take to optimize their plan design.
  • How America Saves 2020: An Update. Created in recognition of how dramatically the landscape has shifted in early 2020 compared with 2019, this update considers participant behavior from January through April 2020.

A consistent theme in all of our How America Saves resources is that strong plan design will serve participants well both now—amid markets and economies roiled by a global pandemic—and moving forward.


  • All investing is subject to risk, including the possible loss of the money you invest.