Tags: 401k | drained | pension | plans

Billions Drained From Retirement Accounts as Americans Struggle to Pay Bills

Thursday, 07 Mar 2013 11:15 AM

By Glenn J. Kalinoski

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Americans are withdrawing tens of billions of dollars each year from their retirement accounts, according to a study by HelloWallet.

The study also revealed that more than 25 percent of households that use a defined contribution plan for retirement have breached their balances for nonretirement spending, totaling more than $70 billion in annual withdrawals. The provider of financial advice asserts that “for many of these households, they may be better off not participating in the 401(k) until they build sufficient emergency savings.”

HelloWallet founder and chief executive officer Matt Fellowes described the $70 billion as a “shocking figure,” according to a story published in The New York Times.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

Milwaukee tax lawyer Vada Lindsey – who works with some of the city’s poor – has observed savers raiding modest retirement accounts due to job losses, unexpected moves, and various emergencies, according to Reuters.

“We are not talking about people squandering the money, for the most part,” Reuters quoted Lindsey as saying. “If you need food, then you’re going to pull that out to take care of your family.”

Workers in their 40s are the most likely age group to pull money from their retirement savings, according to the HelloWallet study.

“By the time workers hit their 40s, they are highly likely to be burdened with mortgages and revolving credit card debt and have kids in high school or on their way to college, creating the largest pressure to breach among any age group,” states the report, “The Retirement Breach in Defined Contribution Plans.”

Other workers most likely to take an early withdrawal are described in the study as “financially unhealthy, low-income.” It stated that 73 percent of the households that cash out their retirement accounts for nonretirement spending cite “everyday basic financial management problems,” including trouble paying bills and general expenses they feel they can’t keep up with.

The study said 8 percent say that they have cashed out their balances due to job loss. Less than 6 percent of the entire population cite what might be called “frivolous” reasons, including a vacation or consumer item.

“Stagnant wages and rising costs are making it tougher and tougher for people to save,” Sen. Tom Harkin, D-Iowa, said at a Senate hearing on retirement issues. The gap between what Americans should have for retirement and what they have actually saved is estimated to be as high as $6.6 trillion, he said, according to Reuters.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 


© 2014 Newsmax. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved