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R.I.P. Retirement: 28% Of Americans Are Raiding Their 401k Plans
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.
In 1980, four out of five private-sector workers were covered by traditional pensions that paid them a fixed benefit based on their salary and length of service once they retired. Now, just one in five workers has a pension, leaving 401(k)s and similar retirement savings accounts as the primary vehicles for retirees to supplement their Social Security benefits.
But millions of Americans, caught between flat wages and high expenses for everything from sending children to college to making home repairs, feel as though they have little choice. The withdrawals have grown substantially in the wake of the financial crisis.
In 2010, 28 percent of participants reported having an outstanding loan against their retirement accounts, an all-time high, according to a survey of 110 large employers by Aon Hewitt, a human resources consultancy.
Fellowes said workers would be better served by establishing emergency savings accounts that steered clear of the potential tax penalties, investment fees, and other risks and costs associated with having money in retirement accounts. Only after establishing an emergency savings fund, he said, should workers plow their money into retirement savings.
If people did the above, then the financial parasites couldn’t take their fees. Let’s not forget that many employers automatically put people into these 401k plans without even asking them. From the same article:
In 2006, employers were given broader latitude to enroll employees in 401(k)-type plans unless workers asked not to participate.
This happened to me at Bernstein and I had to call up to tell them I wanted out.
What a joke this nation has become…
Full article here.
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The idealism of retirement is a very modern fantasy that most people will never enjoy either by poor health or early death. Balance today with the prospects of tomorrow and don't let the fear of not having enough money for a pitiful old age existence get in your way of living life while you're still able. Most elderly people I know would have been better off spending all their money in the beginning of their retirement while their health was still decent, then living off the government when their health deteriorated. Morally twisted but true just the same.
The Aliens are flooding the Cali markets with "hot cashola" with no questions asked. If an American shows up at a realtors office with a suticase of $300,000 cash he gets arrested. When does Uncle Sam crack down on this? The Middle Class folks are locked out of their own market.
Well because the Feds know that there aren't any middle class Americans who have any legitimate amounts of cash on hand. It's all been stolen by Wall Street and Taxes.
Now foreigners, well, we know they have the moulagh.
Can someone explain to me why you end up paying penalties for withdrawing your own money and yet Social Security can drain your Social Security contributions, pay pittance in interest and spend it on items you would never authorise.
Like most governmental bodies: Its because they can.
The Dilemma:
If you keep the stock market pumped up too much, people won't like idea of government confiscation to convert to Soc Security styled "lock box" full of Govt treasuires (IOUs)
An easier sell if the stoick market ain't doing so hot.
people won't then have to worry about the value of their 401Ks falling.
Wall Street Bonuses vs 401K ...Obama/Bernanke rescued Wall Street Bonuses! They reinflated house prices so people spend their money to afford their houses and food. Now to top it off...Wall Street are buying the houses with free money from the FED and then renting them back to the soon to be poor... Isn't the rescue of the Wall Street Criminals just grand!
Its the most disscusting I thing I have ever seen.
This is old news. I spent my 401 (completely) in 2009. It was either that or food stamps. Fuck it.
What recovery? Do you mean Super storm Sandy? Thats the best thing to happen to our economy in years! Sorry to the people who are still suffering. He's a douche a douche a big fizzy douche.............................
I just raided mine because the options they give me to invest in SUCK!!!!!
let's see...
looking at it from "i'm addicted to debt" perspective.
if someone doesn't want to incur the fed penalty (return some of the previous tax rebate), that someone can take a loan at an interest rate of what? 4, 6, 8 or 10% and buy say, a car, or extend someone's house or pay someone's tuition...we can have a discussion about how this is a straight loss to that someone (car loses 1/4 as soon as it leaves the showroom, you are lucky to get a dollar for dollar on home improvements, education doesn't get a job)...
but suppose the someone is taking the money out because they can't afford their credit card bills, their mortgages, their food and utility bills?
there will be smart people who do go to leveraged precious metals instead, who know how to handle the risks.
i am thinking that the "population distribution" of drawdowns is 20%, 75% and 5% in a), b) and c) respectively, i wonder if anyone has any analysis of the motivations of the draw downs....call your local Aon Hewitt immediately and ask!
I cashed mine out years ago..
iphone 2 or 3?
If you have a biz and you are your only and bestest employee you can create a self administered IRA. That is what I did. I bought some rental property and each month I trade the rent money for silver eagles, legal to hold in an IRA. I couldn't stand anther leman moment in my life when wall street goes blink, you lose sucker!
Let's not pretend though that Americans are liquidating their 401ks en masse because they've "wised up" about a possible monetary collapse. 99% of it is simply Americans doing what they do best, spending beyond their means.
What's that? You want a brand new $40k SUV but don't have the money right now? Take it out of your retirement, you're going to be extremely rich someday anyway, so this minor setback doesn't matter in the big picture.
i'd love to believe the fairytale that Americans are cashing out their 401ks and taking it to the local coin shop to stack physical, but it's a pipedream.
This is the explanation of why I am the really ugle dude with the hot chick. I am her retirement. Thank goodness I know better to make sure she has no ownership of my assets.
Actually borrowing a small amount from 401k is not a bad idea...it sure beats what you would pay in credit card interest. Most rates on 401k loans are about 4%....and the 4% interest goes back to you. Of course if you lose employment you either have to repay in a hunk within 60 days or count it as a distribution and pay the taxes. The 28% rate is alarming and speaks to the mindset of many in the middle class: "I keep hearing everything is going in the right direction on the news, from politicians etc.....what the heck am I doing wrong! as I am having trouble staying above water". Nobody wants anyone to know they are in the same boat. That's what financial repression does...it bleeds you slowly.
[font/sarc/ON]OK, I don't get it - whats all the fuss about?
Folks have just realized that since we were lucky enough to get another four years of a fiscal conservative in the Oval Office, we are guaranteed that Social Security has been saved! So, why not draw down the ol' 401K in celebration? That spending will directly boost monthly sales volume and show further proof that our economy is once again humming along at a brisk pace! [font/OFF]
is there a single public employee, who even heard of a 401K ?
"is there a single public employee, who even heard of a 401K ?"
Thousands. They work for the IRS.
There you go Ben -- your beloved wealth effect!!! Perhaps you can take care of these people when they retire with nothing.
"What a joke this nation has become…"
for 30 years, I have failed to get the joke.........
had?
With the prospect of "means tested" SS & Medicare benefits the boomers once again front run their own Socialist government's agenda to screw their own citizens again, (shocking I know).
The mob is just too smart and fast for govt to outmaneuver.
4 more years of Obama and every American will have learned to become flat broke by age 65, then 60, then 50 then .....
I raided mine years ago to buy gold and silver with it.
A 300% return is not too shabby huh? :o)
Not to burst your bubble as a 300% return is nothing to sneeze at, but do you realize how many stocks were trading near $1/share during the 2008-09 crash that are now worth many times that? LVS was just over $1, hit over $60 last year plus pays a nice divvy. Buy when there's blood in the street!
Couldn't care a less about that. Paper is worthless to me.
One day you'll remember this post when your brokerage funds are seized/stolen.
Silly me, what was I thinking? Hmmmm, guess those fiat-based stock gains can't be converted to precious metals, thanks for lesson!
Whatever you say Captain Hindsight.
One day all that paper will go "poof".
Until that day I guess you'll look/feel like a genius, huh?
how about fiat-based stock losses? what do you convert them to?
it dipped to just over $1 for a reason. it's way too risky for lifetime savings methinks.
their $41,000 in their company's mortgage backed portfolio pension fund wasn't gonna help anyway.
you are so, so, so right
jb
from here (h/t AlaraicBalth):
http://www.naviganteconomics.com/docs/Litan_Singer_401k_final.pdf
Using the Investment Company Institute data above (showing 18.5 percent of all participants with a loan), and Aon Hewitt data on average outstanding loan balance ($7,860),13 along with an estimate of the number of active participants in a defined contribution plan in the United States (72.0 million at the end of 2009),14 we estimate that the outstanding defined-contribution loan balance in 2009 for the U.S. as a whole was $104.7 billion (equal to 0.185 x 72.0 million x $7,860).15
15. This estimate is close to the $108 billion of loans outstanding implied by the Plan Sponsor Council of America. See Plan Sponsor Council of America, PSCA’s 54th Annual Survey of Profit Sharing and 401(k) Plans, 2011 (estimating that loans were 2.4 percent of plan assets of the survey respondents in 2010).
pension assets in the tabel above that bit are an impressive 17.9 trillion...which, at a 5% annuity rate...gives c. 900 billion in annual pension income..with 150 million in the wrokforce gives a pensoin of 6,000 a year or 120 a week...wtf!?!
Here is the shocker i got today when looking at my IRA - seems the F Fund mis-priced Silver Eagles ..... or do they know something about silver that we don't? This is a copy/paste. First I said to the them; great, since it is worth less than zero, send me the coins; they didn't bite. They also wouldn't sell me any for a negative price! If they can make this big a mistake, just think about all their little "mistakes".
SymbolDescriptionQuantityMost RecentChange Since CloseChange Since PurchaseCost BasisActionPriceChangeValueDollarPercentDollarPercentPer ShareTotal
SEA1 AMERICAN SILVER EAGLE ANY YEAR 1 OZ 3,000.000 $32.680 -$294.12 $98,040.00 -$882,360.00 -90.00% -$10,932.55 -10.03% $36.32$108,972.55
From a selfish perspctive, ths is good. The less money in total in 401ks, the less chance the government will raid them to buy bonds...
Give yourself some credit guys. This sheeple has been listening, reading, and learning. I and I am sure a lot of others who have woken up have decided to take our penalty now than when the "penalty" is dictated by the government. They have been eying these funds for awhile now, and it is only a matter of time before this money is utilized to support government stealing...um...funding. Some of us are listening.
Nah.... most Americans are stupid donkeys... they are withdrawing pensions because they are running out of 3 for 1 pizzas on NFL triple header Sundays. They probably don't even realize what a 401k is - all they know is there is money there - they can get it - and they want stuff - so they take it. Surely they have no idea that there are penalties - and if they do they don't give a shit
Because when they want it NOW that means they want it NOW.
you are describing an ape. but i agree with you.
The Fed prints 85 billion a month. They don't need to confiscate or impair your paltry 401K money. Unless you consider confiscation by inflation.
I find it funny when people say the "government is going to confiscate retirement plans." They already are, it's called inflation.
That way, the politicians can point the finger at someone else rather than just coming out and formally taxing or seizing them.
What good is a savings account when inflation eats it up?
When I was young, if a guy put 10$ a week into his account for 20 years, he had some real retirement $$.
depends which is winning the race...
interest rates or inflation. i suspect 'back when' your interest rate was higher than inflation(?)
jb
I've liquidated all of my "retirement" accounts and I suggest everybody do the same before it's too late.
There is something you need to get through your porn soaked heads...if you cannot access your money, RIGHT NOW, the money isn't yours. Period.
Retirement accounts will be the easiest to raid. By law you can't withdraw without a penalty. Good luck trying to withdraw in the future, that money is going to be locked up, re-re-hypothecated and gone forever.
I expect harsher and harsher rules for retirement accounts, and mandatory investment in treasuries.
Your financial assets should be primarily physical precious metals held outside of the banking system, physical cash, and simple bank accounts.
All great points.
However, there are some people that will read this advice and ignore it. You can present all evidence to back up your points, but they will not listen because they have been conditioned by many years of MSM programming and financial propaganda. If the masses are doing it, it must be a good thing! "Group Behavior" is very tough for most people to overcome.
It's nice to have a 401K at first..........you see that number get nice and big, feel all proud of yourself.......
......but you can only SEE the money, just the numbers. You can't actually TOUCH it.
It's kind of like having an attractive girl as JUST a friend.
just remember..if you expect to live 20 years in retirement...the annuity you buy with your 401k should have a rate of at least 5% (100% divided by 20 years).
course, if you could average an investment return of a measly 4% per annum (half of what the state pension funds assume) on your diminishing capital pot handed to the annuity company, your annuity rate should be 6.25% per annum (hint..give yourself a 25% pension increase and do it yourself!).
You can't go and drain your 401K - that's what the government plans on doing - to 'protect' you by investing YOUR money in safe government bonds.
I kind of view any 401K funds as lost - either to inflation of government confiscation. WTF - not likley I'm going to live long enough to collect them anyway.
Sure you can drain it, but you'll basically have to quit your job to do it... like I did.
should i finish reading this article or go ahead and click Fiipinocupid.com on the left....
decisions, decisions
jb
heh...i thought the ads on the left track your recent surfing/email browsing history? mine says "now offering new low spreads"...its fx, honest!