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R.I.P. Retirement: 28% Of Americans Are Raiding Their 401k Plans

Home - by - January 16, 2013 - 15:05 America/New_York - 11 Comments

Via Michael Krieger of Liberty Blitzkrieg blog,

This trend has been in place since the financial crisis, but the fact that it is accelerating is extremely disconcerting.  First off, this is not the kind of behavior that should be witnessed in an “economic recovery.”  Second, we need to remember the huge percentage of Americans on food stamps and/or disability.  As we have discussed previously, many of them also have jobs.  So essentially, a wage and a check from the government is still not enough to survive.  They still need to tap into a loan from their 401k plans.

From the Washington Post:

 More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

A report due out this week from the financial advisory firm HelloWallet found that more than one in four workers dip into retirement funds to pay their mortgages, credit card debt or other bills. Those in their 40s have been the most likely culprits — one-third are turning to such accounts for relief.

Fresh data from Vanguard, one of the nation’s largest 401(k) managers, show a 12 percent increase in the number of workers who took loans against their retirement accounts or withdrew money outright since 2008.

The most common way Americans tap their retirement funds is through loans, which must be repaid with interest. Those who withdraw money face hefty penalties. In most cases, they not only incur a 10 percent federal tax penalty but also pay income taxes.The costs are financially harmful to families even as ­money-management firms reap massive fees for handling retirement accounts that ultimately are not used for retirement.

Hint, banksters win again.

 

» 11 Comments

  1. Menderman

    January 16th, 2013

    I heard today that the fed was going to ‘borrow’ federal employees retirement accounts to pay bills, so are they gonna make using your own retirement illegal because they need it?

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  2. Tim

    January 16th, 2013

    They’re gonna force 401k owners to put some percentage of their monthly payments towards their 401k into the worthless paper put out by the Treasury.

    “Borrowing” from the FERS is just a first step.

    FERS is a combination of the “Thrift Savings Plan” (TSP), Socialist Security, and taxpayer-funded retirement payout. Only the TSP represents real money.

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  3. Noodengr

    January 16th, 2013

    I work for a Fortune 500 company, in which our pay on average is well over the national average.
    This year we implemented a nomimal fee open up a loan on your 401k. In part it was due to the very high number of people taking advantage of how easy it is to get to this money. If memory serves the percent with loans out here at my company is comparable to what the national average is.
    I think it is more reflective of people still living beyond their means than truly needing to get by with a reasonable lifestyle.

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  4. Mark Zist

    January 16th, 2013

    I put last years 401K in the back yard in the form of a pool. That way me and the little marxists get to have fun with the money instead of the banksters.

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  5. MNHawk

    January 16th, 2013

    The Evil Banksters are only selling what the stupid desire…the ability to legally raid their retirement accounts.

    I can’t imagine being the typical Obama voting, dumbfluke American, with a net worth of only $50,000 (yes, that’s the average), headed towards retirement in an age where SS goes bankrupt.

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  6. Major Mal function

    January 16th, 2013

    They’re just now noticing? 500 years of accumulated wealth stripped and shipped overseas for plastic throw away crap.

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  7. Harrison

    January 16th, 2013

    What’s going to happen when the 401Ks are done?

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  8. Tim

    January 16th, 2013

    I know I don’t have to belabor the point – but it may be better in the long run to strip your 401k now, while it’s worth something, then let the gov’t eat it later with their phony T-Bills.

    Really hard to predict the future with socialists ruining the country.

    Uhh … running the country …

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  9. Carlos The Jackal

    January 16th, 2013

    Better to blow your own money on the ponies then to let the government get it. At least you have a chance with the ponies…

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  10. scr_north

    January 16th, 2013

    Every dollar taken from a 401K is a dollar closer to the collapse of the Social Security Pension. It’s going to be clawbacks and means tests for people wanting to collect SS and if they’ve spent money out of their retirement plan now it will be money they qualify for when they pack it in. Hell, I dodn’t know you could take loans out of a 401K. Here in Canada you can borrow some money from your RRS but only for purchasing a house and you have to pay it back within 20 years (I think) any other money taken is fully taxed as regular income and can’t be put back in at a later date.

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  11. Nutjob

    January 16th, 2013

    This is the last thing holding some people above water.
    Alot doesn’t have to do with their lifestyle, people have already scaled back.
    You see parents and grandparents depleting their nest egg just to stay afloat.
    When its gone, it doesn’t matter what Barry does to stimulate the economy that is “allegedly improving”.

    The only increase in GDP is the actual inflation cost which is just 1 more straw on the camels back.

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