Study: 25% Of Americans Dipping Into Retirement Plans For Other Expenses
High unemployment and underemployment forced one in four Americans to pull money out of a retirement plan to make ends meet.
Not even the high penalties that make it prohibitive to tap into 401(k) accounts were a deterrent as a record $60 billion was yanked from nest eggs to pay for mortgages, car loans and credit card debts.
Those are some of the conclusions of a recent study by online financial-guidance service HelloWallet. The study shows that saving and retaining money for a secure retirement are becoming more difficult.
The study shows that pre-retirees are breaking into retirement accounts, taking out billions of dollars. They are spending on average some 40 percent of the money that was supposed to be for their golden years on the here-and-now.
“Over 25 percent of households that use a 401(k) or a similar defined-contribution plan have used some or all of their retirement saving for nonretirement needs,” according to the report. The study relied on Census and Federal Reserve Board data.
“This is a massive, systematic problem,” the report warned, “that now affects one out of every four participants on average, which is more like a gaping hole in the defined-contribution boat than a pesky leak.”
The report said that those most likely to “breach” their retirement plans — either borrow or cash out of them — are people in their 40s.
“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,” according to the study.