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Usage Of 401(k)s As An ATM Soars By 28% In Q4

Tyler Durden's picture


Nearly one-fifth all people with a 401(k) plan have at least one outstanding loan from it with those under 30 years old having taken an average 38.2% of their remaining untouched balance as the new ATM to maintain the credit-fueled standard of living. In a press release from Wells Fargo, data based on 1.9 million 401(k) holders shows that Q4 2012 saw a stunning 28% surge in the number of people taking loans from their retirement plans. While the numbers are scary for younger people, the older generation is taking more loans with 34.2% of those in their 50s and 28.9% of those in their 60s having taken loans from their retirement plans. Yet another example of the 'strength' of the recovery as those with at least one loan outstanding had an average balance in their retirement plan of $7,764! So much for the wealth effect.


Via Wells Fargo,

Through an analysis of participants enrolled in Wells Fargo-administered defined contribution plans, the bank announced today that in the fourth quarter of 2012, there was a 28 percent increase in the number of people taking loans out from their 401(k) and that the average new loan balances increased to $7,126 from those taken out in the fourth quarter of 2011 - a 7% increase from $6,662.


Of the participants who took out loans, the greatest percentage were to people in their 50s (34.2%), followed by those in their 60s (28.9%) and then by those in their 40s (27.3%). The increase among participants in their 50s was nearly double the increase among those under 30. This is based on an analysis of a subset of 1.9 million eligible participants in retirement plans that Wells Fargo administers.


The increased loan activity particularly among older participants is concerning because those are the years when workers can start to make ‘catch-up’ contributions and really need to focus on preparing for retirement,” said Laurie Nordquist, director of Wells Fargo Retirement. “However, we know that this age is also the ‘sandwich’ generation, caught between paying for their kids’ education and supporting elderly parents, which makes saving for retirement even more challenging.”


In addition to the 2012 new loan activity, according to the Wells Fargo data nearly one fifth (19.2%) of people with money in a 401(k) plan had at least one outstanding loan, and of the outstanding loans, the average balance was $7,764. While older participants are taking more loans out than their younger colleagues, the younger a participant is, the greater the loan tends to be as a percentage of their 401(k) account balance. For those under 30, the outstanding loan balance is 38.2% of their remaining untouched balance. For those over 60, it drops to 21.1%. However, only about 9% of all participants under 30 have an outstanding loan, compared to almost 25% of participants in their 40s.


“While the increase in loan activity is concerning, we know that loans are not the biggest driver of leakage from retirement savings,” said Nordquist. “In fact, employees cashing out their 401(k) when they leave an employer are a greater concern. Those dollars are often spent whereas with loans the funds are often repaid and stay in the retirement nest egg.”




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Fri, 04/12/2013 - 09:36 | 3440376 Almost Solvent
Fri, 04/12/2013 - 09:39 | 3440401 Dr. Engali
Dr. Engali's picture

I just left a krugman in the toilet bowl....that's my opinion on him.

Fri, 04/12/2013 - 09:43 | 3440423 Stoploss
Stoploss's picture

LOL!!  "retirement"  LOL!!

That shit's over with..

Fri, 04/12/2013 - 10:12 | 3440554 quintago
quintago's picture

30% of homes in Silicon Valley are being bought all cash. When you consider the average price at 650K, you'll realize that people are draining their savings to lbut these homes because in many cases they can't compete when they go in with a loan contingency.

No savings, no problem....real estate appreciates faster than some under-performing funds my company tells me to put it in.

That's the logic anyways. But when the shtf, next go round the financing will dry up and there won't be as many cash buyers, and then it's all downhill from there!

Fri, 04/12/2013 - 12:22 | 3441418 syntaxterror
syntaxterror's picture

My Silicon Valley HQ-ed company is hiring massively in China and India right now. So all of those 1 million dollar fixer uppers might not be worth 2 million in 3 years if all of the companies in SV continue to hire abroad.

I've lived near SV for a long time and there ain't nothing done here that can't be done elsewhere.

Fri, 04/12/2013 - 13:16 | 3441728 AldousHuxley
AldousHuxley's picture

you can't just relabel corporate offices in New Jersey suburb as "tech business park" and expect world class innovators and capital to flock there.

Most successful startups are started by ex-employees of successful startups.


Bell Labs (NJ where Shockley worked)

Shockley Semiconductors (Mountain View, CA simply because Shockley grew up there)

Fairchild Semiconductor (by ex Shockley engineers)

Intel and AMD (by ex Fairchild engineers)


son of stanford professor became a dean of stanford engineering and advised students like Bill Hewlett and Dave Packard to form their own corporations and established STanford Research Park which until recently was Facebook's HQ.


Fri, 04/12/2013 - 09:45 | 3440436 krispkritter
krispkritter's picture

Nope, can't do it, can't read him this early in the day. Not without starting to drink heavily...jeebus, it'd give you that 'morning sickness' thing without all the hormones...

Fri, 04/12/2013 - 10:09 | 3440534 ThalesOfMiletus
ThalesOfMiletus's picture

Yeah, if Au is so worthless, why are the bankers scrambling to physically reclaim it?

As always, watch what they DO, not what they SAY.

Fri, 04/12/2013 - 10:30 | 3440667 Bicycle Repairman
Bicycle Repairman's picture

Krugman's implication is that the current system is OK.  It isn't.

Fri, 04/12/2013 - 10:32 | 3440687 Freddie
Freddie's picture

I wonder how many voted for Hope & Change.  Both elections were rigged plus the elites had two RINOs as back up.

Fri, 04/12/2013 - 09:36 | 3440380 Cognitive Dissonance
Cognitive Dissonance's picture

Explains to some degree how the consumer has managed to continue spending.

<But all good things must come to an end.>

Fri, 04/12/2013 - 10:03 | 3440506 tango
tango's picture

The difference between today and the Dark Ages (when I grew up) is that we spend until it's gone then demand gov't action.  In the old days, one had no choice but to be prudent, do without and save. It is the instant gratification psychology that is the problem.   Yes, all good things....but when they do, citizens turn to the feds to keep the cash flowubg,  

How do folks keep buying with rising SS taxes, gas, food and health care?   State assistance in housing (a Walgreen worker nearby earns $42k and pays $120 of her $1800 rent due to subsidy), food stamps, health care, energy bills, child care, school lunches, disability, etc.   The true middle class - $50k-$100k - is being flayed.  With taxes, SS, health care, higher costs for necessities, disposable income is drying up. Tyler had an article about 2 families in which the one earning $29k had more disposable income than the one earning $69k.  Talk about a disincentive to even try.    

Fri, 04/12/2013 - 10:14 | 3440559 new game
new game's picture

pedal to the metal, wheels a spinning but alas, no forward movement...

what could be wrong?

Fri, 04/12/2013 - 10:54 | 3440796 TaxSlave
TaxSlave's picture

It's called "Get it out and spend it on something tangible while you still can, because it's going to evaporate."


Fri, 04/12/2013 - 18:15 | 3443115 tango
tango's picture

I agree.  We are buying hard assets (land, PM, food, condos, energy stocks, art) as opposed to simply piling up dollars ("safe") in the bank.    The garden is expanding - 20 veggies.  Last year was such a banner year I was giving away quarts of tomato sauce, herbs, pesto and peppers for smoking. 

Fri, 04/12/2013 - 09:37 | 3440385 TeamDepends
TeamDepends's picture

Right up there with best picture yet, Tyler(s)!

Fri, 04/12/2013 - 09:36 | 3440387 Mr. Magoo
Mr. Magoo's picture

What is a 401K????????????????????????????

Fri, 04/12/2013 - 09:40 | 3440402 Sudden Debt
Sudden Debt's picture

anything but 401k dollars...

Fri, 04/12/2013 - 09:41 | 3440412 icanhasbailout
icanhasbailout's picture

"retirement nest egg" = govt control of your money

Fri, 04/12/2013 - 09:49 | 3440453 krispkritter
krispkritter's picture

By the time you get to it, it will a 'retirement nest shell'.  Empty.

Fri, 04/12/2013 - 09:58 | 3440477 pods
pods's picture

"These are IOU's, they are every bit as good as money.  You will see, it's all there. Every penny accounted for."


Fri, 04/12/2013 - 10:01 | 3440489 tarsubil
tarsubil's picture

This really sunk in when I wanted at the money. If it was really mine, then I'd have some semblance of real access to it. Retirement funds are total bullshit. I move the money left around playing bonds and major indices but the gains I make are just meh. It's all funny money anyways. I'm already prepared for it to be Corzined while the poor schlup in the next cube literally went pale as a ghost when I explained Bass's point on Japan and how we're right back at 2007. The sheep still line up to be fleeced.

Fri, 04/12/2013 - 10:22 | 3440595 new game
new game's picture

retardment is when you think you will have enough but you never will.

do it today, but you must change your lifestyle first.

it is wonderfull, fuck da man!!!

hint-minimalist(google it)-it can be done-i am living proof.

living today not enslaved for shit i don't want or need.

no rush, no time shedules. just my plan to eat something, get some exercise and get to some chores that can wait til i get to them.

life is good...

Fri, 04/12/2013 - 10:23 | 3440628 Awakened Sheeple
Awakened Sheeple's picture

Are you farming new game?

Fri, 04/12/2013 - 10:30 | 3440669 new game
new game's picture

farming life. i just got sorta lucky with housing boom. liv in cit and have 40 w/cabin up nort.

both are for sale to get south to oky or tex...

small farm is my goal...

Fri, 04/12/2013 - 09:38 | 3440390 Racer
Racer's picture

What is the point of having a 'retirement' plan because when you get to retire the banksters and politicians will have already looted it

Fri, 04/12/2013 - 09:45 | 3440431 TuPhat
TuPhat's picture

You got it right, Racer.  In 2009 I took out a loan from the 401K and paid off the house.  If the Investment company had failed I would have 0 in the 401K and still owe money on the house.  Now the house belongs to me as long as I pay the property tax.  If the 401K investment fails I still have something.  I think the loan increase may be due to fear of a collapse as much as an ATM machine effect.

Fri, 04/12/2013 - 13:06 | 3441672 Not My Real Name
Not My Real Name's picture

1) Only put enough money in your 401k to take advantage of your company match -- that's an instant 100% return.

2) Borrow the max from your 401k and buy phyz silver and gold as a hedge

Fri, 04/12/2013 - 14:24 | 3442020 Bendromeda Strain
Bendromeda Strain's picture

Personally disagree - don't think the match is worth the principal investment anymore. If you loan up to the max, you will already be "paying yourself back with interest" (snort). Why take even more good money and potentially Corzine it? You bought some phyz, that is good. Use your excess pay to continue the $$ cost average buying (if you have all your other SHTF ducks in a row).

My $0.2

Fri, 04/12/2013 - 09:45 | 3440435 Bad Attitude
Bad Attitude's picture

I have to wonder how many of those loans were used to buy PMs.


Fri, 04/12/2013 - 10:26 | 3440643 new game
new game's picture

for sure, some people have enuf sense to hedge the paper with phiz in possesion.

Fri, 04/12/2013 - 11:09 | 3440955 Dr.Vannostrand
Dr.Vannostrand's picture

This guy right here did just that. Unfortunately, my boating skills suck.

Fri, 04/12/2013 - 09:39 | 3440391 FieldingMellish
FieldingMellish's picture

Not one for bible quotes but it does seem apt:

Whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.

Fri, 04/12/2013 - 09:58 | 3440478 Bearwagon
Bearwagon's picture

That's Matthew 25.29

The bible has apt quotes for every situation.

Fri, 04/12/2013 - 12:13 | 3441365 GeezerGeek
GeezerGeek's picture

Perhaps a little more stufying the Bible will help you next time you wish to quote the Bible. That verse is at the end of a parable wherein three servants were given varying amounts of money by their master. Two invested wisely and were rewarded when the master returned sometime later. The third, who was given the least and failed to use it productively, was berated. The specific verse you quote is talking about more being given to those who have invested wisely with the gifts entrusted to them, while the one who failed to invest wisely was no longer trusted. 

This isn't really about money. It could just as easily be seen as talking about responsibility in a modern environment. If your boss gives you a job and you excel, you may very well be promoted to a more responsible position. If you fail at an assigned task, you probably won't be given other opportunities.

It irritates me when inividual verses are taken out of context, not to mention the problems that arise from different words used in the numerous English translations.

Fri, 04/12/2013 - 09:38 | 3440396 Sudden Debt
Sudden Debt's picture

7.7k.... just enough to cover the first 3 months of retirement...GOT PLANS???!?!?

Fri, 04/12/2013 - 10:12 | 3440560 tango
tango's picture

I usually not a believer in dire prophecies but the plight of those who retire with zero money is a recipe for disaster.    (Thank goodness they are old instead of young.)  SS has become what opponents feared -THE retirement vehicle for folks who didn't save a dime during their lifetime. I don't understand our failure as a society to stress saving at every level - schools, business.  , in politics and particularly at home.  

But I guess the "want it now" mentality has taken hold.  Schools can't teach such things because of fairness - poor folks couldn't save as much.  Politicians know that bering dependent gives the State tremendous power. Central planners know that high savings would be the end of our spending/debt-based economy.  So everyone is happy. 

Fri, 04/12/2013 - 10:57 | 3440829 TaxSlave
TaxSlave's picture

I don't understand our failure as a society to stress saving at every level - schools, business.

You don't understand that the system is rigged to punish savers and reward borrowers?  The fact that savings goes negative and borrowing goes beyond any possibility of repayment in a system in which the currency is comprised of debt surprises you?  The great awakening is taking longer than I'd hoped.


Fri, 04/12/2013 - 12:26 | 3441449 GeezerGeek
GeezerGeek's picture

I concur. Money I saved going back to the 1970s has mostly lost its purchasing power. Too bad I wasn't smart enough/brave enough to start plowing every extra dollar into gold (once owning it was legalized) and silver coins.

Putting money into a 401K nowadays is only good to the extent that the employer matches a significant portion. Putting money into that (or an IRA) has a potentially negative effect once one withdraws it while collecting Social Security. If one is married and has an employed spouse, it is easy to see up to 85% of Social Security income taxed. It is based on the level of other income. Withdrawals from tax-deferred retirement accounts also accrue toward that income level. Thus, even if one is in the 10% tax bracket, each dollar withdrawn from a retirement account can result in approximately $1.90 of additional tax, which is effectively a 19% marginal rate.

Here's a question: If one takes a loan out on a 401K, and then the government confiscates the account, is the loan still payable? 

My suggestion: upon turning 59 1/2 years, take out any money in a 401K, avoiding the 10% penalty.

Consult a proper tax lawyer for more accurate information, but this is how it played out for me this past year.

Fri, 04/12/2013 - 18:27 | 3443152 tango
tango's picture

Thanks for spreading this info  My wife and I paid max into SS for years yet we will receive only slightly more than someone who paid a fourth.  Our Roth IRAs are allegedly immune since we already paid taxes on them.  In our 40's we began diversifying -  property, PM, art, land - to avoid the very thing you mentioned.   I consulted at AIG when it went down and many folks lost almost everything.   One of the few thigs to emerge from the recession was a limit on the amount of company stock an employee could own.   I am not taking SS unti my wife retires to avoid the taxation problem. 

Answer to your question:  Probably not but if we come to that it won't matter anyways.  If the US, once the freest nation on Earth, voides the most basic of property values then we'll have gone so far that loans won't matter.

Fri, 04/12/2013 - 09:41 | 3440410 SeverinSlade
SeverinSlade's picture

401Ks & IRAs...Holding your own money hostage and taxing/penalizing you for ever trying to access it.

Fri, 04/12/2013 - 10:13 | 3440556 stoverny
stoverny's picture

Um this is a rather silly generalization.  401Ks are tax advantaged because the money is designed to be used for retirement.  The penalty for early withdrawal is the tradeoff for the tax benefit.  If you don't want your money "held hostage", don't open a 401K and pay full taxes on it immediately - pretty simple.

IRAs are nothing more than govt attempt to use the tax code to encourage people to save for retirement.  No one is holdnig anything hostage.  Rather dramatic hyperbole, even for ZH.


Fri, 04/12/2013 - 10:44 | 3440736 SeverinSlade
SeverinSlade's picture

Well aware of what it was "designed" to do.  No one said people are forced into this situation.  But once someone makes the agreement, their money is being held hostage...Hence penalties for early withdrawal.  Unless of course your withdrawal meets one of the gererous exceptions provided by our all-loving benevolent government.

Fri, 04/12/2013 - 14:35 | 3442083 syntaxterror
syntaxterror's picture

How else can you borrow money from yourself and pay a banker and taxer at the same time? Fucking brilliant if you ask me.

Fri, 04/12/2013 - 11:01 | 3440861 TaxSlave
TaxSlave's picture

Government programs NEVER accomplish what they promise.  Ever. 

The tax 'advantage' puts your loot up as low-hanging fruit.  There are two rules to government: "I make the rules", and "I can change the rules anytime I want".  See Cyprus.  Fer fucksakes.


Fri, 04/12/2013 - 12:33 | 3441490 syntaxterror
syntaxterror's picture

Tax benefit!!! You don't know what tax rates will be in 30 years! And this debt-fueled corrupt government ain't lowering taxes any time soon with it's communist-esque 5 year plans. Forward muppets!

Fri, 04/12/2013 - 09:43 | 3440415 Inthemix96
Inthemix96's picture

If you dont believe we are fucked by now,

What will make you believe in the future?

These fucking scoundrels in the financial class, with bought off politicians have trully fucked us all.

Cunts, you will get yours though, of that I am fucking certain.

Fri, 04/12/2013 - 09:59 | 3440487 Bearwagon
Bearwagon's picture

And they shall get theirs! Keep enraged!

Fri, 04/12/2013 - 09:44 | 3440421 sansnobel
sansnobel's picture

I took a $50,000 loan from mine last month.  Why you ask?  Because it was the only way to get my money out of the system before the government confiscation begins.  Funny thing, I asked to close it out entirely and pay the penalty to the tax man now just so I could have MY money now.  Take a guess as to what my plan manager says:  "You can't close this out until you either A: Retire  or  B: Quit your job "  ......  So there you have it.  Pretty pernicious little system wouldn't you say?  Oh no don't be silly folks that money doesn't belong to you.....silly little slaves get back to work slave!!!!!!!!

Fri, 04/12/2013 - 09:49 | 3440449 Burr's 2nd Shot
Burr&#039;s 2nd Shot's picture

A 401k loan is the only way in my existing plan to have an allocation to physical metal and land. Pricey, perhaps, but better than a paper promise.

Fri, 04/12/2013 - 10:58 | 3440846 Esso
Esso's picture

I started code provision 72(t) penalty-free early withdrawls from my IRA (I'm 52). I'm a general contractor and don't see any recovery anytime soon, if ever.

I want my money back in my control (Translation: More PMs).

We're finished fellahs. Get ready for it and get used to it. PMs on sale today!

Fri, 04/12/2013 - 11:41 | 3441156 Yamaha
Yamaha's picture

I also don't think that is a bad idea if spent wisely - not on new cars.  I consider my withdrawals the fixed income portion of my asset allocation.  How many idiots are sitting in cash getting nothing?  Who wants to try to borrow money from a bank?  

I have installed a large vault door on an all concrete storage area.   It holds many guns, ammo, back-up power, survival gear, and food storage.  It also hold all digital and family records.  Thought of fire or theft?

Easier to borrow from myself - Wells Fargo is just pissed that this can be done and you don't have to come to them to get raped on interest rates.

Fri, 04/12/2013 - 14:40 | 3442114 Disenchanted
Disenchanted's picture

So you take a loan out on your 401k and you pay yourself back @ a higher interest rate than the return you'll receive from the 'safest' investment option(usually a MM or maybe a bond fund) in the plan. What's the problem?


I'm in the same boat as you sansnobel...the only way to access it is to quit or retire, and I can't even get a loan from mine unless I can prove "hardship." Also it's the only way I can get anything out of the large corp. I'm employed by with a 6% match on what I contribute. No pension coming from this gig.

My wife however can take loans out with her 401k, and we've been utilizing the hell out of that option.

Maybe I'm simple, but why is the perception promoted that it's a bad thing to borrow from your 401k? Usually this is what you hear from the 401k management companies such as Merrill Lynch/BA, T. Rowe Price, Vanguard, etc.. Could it be that they have an ulterior motive for their positions on 401k loans? Yeah I already know the reasons why from their POV.

Fri, 04/12/2013 - 09:45 | 3440426 laomei
laomei's picture

So it appears as if they found a new way to rob your 401k... force you to spend it.  Laff.

Fri, 04/12/2013 - 09:54 | 3440470 LFMayor
LFMayor's picture

Yeah, spent it on ammo and preps. 

something about laughing last...

Fri, 04/12/2013 - 10:55 | 3440802 Urban Redneck
Urban Redneck's picture

I'm sure they would much prefer for people to keep their money in the 401k plan, that way they can take a loan against it themselves when the time comes...

Fri, 04/12/2013 - 09:46 | 3440442 Confundido
Confundido's picture

It's totally, 100% absolutely the right thing to do! Either you take your monies out of the 401k or the govt. will take it from you. Be the first. 

Fri, 04/12/2013 - 10:14 | 3440575 sansnobel
sansnobel's picture

I used the proceeds of the loan to go ahead and extingish my Mortgage debt.  Reason is pretty apparent, I have no other streams of income other than my job so when the shit hits the fan again and IT WILL!!!!  I have a house that is paid for entirely and the thieving Bankers will not get their hands on it to forclose and fleece me out of my net worth.  Actually I kinda hope they try to forclose on me after my house is paid for so I can produce legal title and sue their asses!!!!!!!

Fri, 04/12/2013 - 09:48 | 3440445 krispkritter
krispkritter's picture

Ooooh looky! The serial junker asshole is at it again... Tylers, can you put Capital Controls on the red arrows? Or just shitcan the asscake that does like 500 an hour?

Fri, 04/12/2013 - 09:50 | 3440456 Dr. Engali
Dr. Engali's picture

That's Joe Kernen and Becky Quick. They tag team the morning serial junkings in the same manner that they tag team uncle Warrens shriveled pecker.

Fri, 04/12/2013 - 09:56 | 3440474 krispkritter
krispkritter's picture

That calls for brain bleach...eeeewwww.  Explains why they were just over on the silver & gold article...

Fri, 04/12/2013 - 11:03 | 3440903 Esso
Esso's picture

Egads, I didn't need that visual in my head, Doc. I'll forgive you since you're a fellow HoosierHickistanian.

Fri, 04/12/2013 - 09:47 | 3440446 Caveman93
Caveman93's picture

Been borrowing and paying back myself with higher interest since 2009. 15 Loans so far to date. The balance in my "actual" 401K is much higher it's just that it's not in the form of a paper colored pie chart anymore. I have very many new shiny paper weights and door stops made by some unknown company called Johnson Matthey. ;)

Fri, 04/12/2013 - 09:51 | 3440457 Orwell was right
Orwell was right's picture

This story ignores one obvious option....that people's salaries often get cut when they "leave a job", and tapping into a 401K is their only option.

Granted...Americans have become far too accustomed to living on credit, but the ugly unspoken truth is that between Bernanke decreasing the actual value of the dollars they have, and the increasing lack of jobs that pay reasonable salaries, folks are between the proverbial rock-and-a-hard-spot.  Two income households are now (maybe) one income...(or one and 1/2).   Even folks who didn't go crazy wild with their credit cards are having problems.

The 'sheeple' have let this happen....(I get that)....but there are also good, hardworking folks who are getting punished as well.

Fri, 04/12/2013 - 10:04 | 3440494 Shizzmoney
Shizzmoney's picture

It isn't their fault they are financially aloof and pridefully optimistic: it's America!

It took me til I first got laid off at 26 to realize this; 5 years later I've deleveraged my debt by 80% (and will be in the black by August) and paired back my expectations on my life - like for example, I'll probably never marry or have children because I know I can't afford that AND my end of life care for my parents. 

It also helps that most employers don't match 401Ks today; mine doesn't, so why should i participate?  With these ZIRP rates, you have to gamble either in the stock market (rigged) or actual gambling (which is what I do; when I win - it actually HITS my hand).

I'm content with that.  Others might not be, but there will be alot of angry white people who, when they have the rugged pulled under them in a few years, will realize how it feels to be a serf in America once and for all.

Fri, 04/12/2013 - 10:23 | 3440621 tango
tango's picture


The way not to gamble with investments is to get a good financial manager.   A professional does not charge for services (he is paid if you purchase securities offered).  A professional will set up a strategy based on your current and future needs.   He/she will never "push" anything.  Most important question, what is their strategy for dealing with down times in the market?  And because they have a strategy, they retain capital.   I see this all the time - "The market is rigged / it shouldn't be this high / it's not real" - but none of these is a reason for not investing in a rising asset.   

By the way, marriage is one of the best financial decisions you can make.  Two can almost live as cheap as one - kids are a tossup.  I have one good, one bad, love em both.  Good luck and congrats on digging yourself out of debt. 

Fri, 04/12/2013 - 10:28 | 3440648 adr
adr's picture

I got my first job with Lucent out of college. Got stock options, 401k, a decent starting salary. I ended up with a couple grand in the 401k, stock options worth just about nothing, and a pile of debt from needing to move half way across the country and live in Hoboken.

The 2000 market crash wasn't very kind. Since then I have refused any 401k plan, haven't invested a dime in the ponzi, and pledged to work only for private corporations that value labor. My friends that work for large multinationals average 1-3 years at their jobs. Sure they get paid more than me, some got lucky and got shares that moved up enough to buy some nice toys, but in 2008 most of them lost everything.

I have a mortgage, but I'm almost out of debt after consolidating all of my debt with my wife's when we got married. I put $10k of her debt on a 2.9% locked balance transfer. She wasn't good with credit, I am.

You can live outside the Ponzi if you are content to live a little above average. Could I make $125k a year at a large publicly traded company? Yeah, but I'll never see my kids. I could probably get that Audi S6 I really like, but that isn't really important. I'd be like a lot of people I know who change jobs every couple years with no stability. I don't want that.

I have a friend that works for Google. She pretty much lives there and puts in 80+ hours a week. She likes it and tells me she loves all the perks. Swimming pool, no set hours, free meals sometimes, free childcare, even sleep pods for taking naps. She has a 2400sq ft home that she never uses. She told me she bought the house as an investment, not to really live there. Wow, what a dream life.

Fri, 04/12/2013 - 09:52 | 3440460 NoDebt
NoDebt's picture

So I get a call from a guy who wants to take out a loan from his 401k.  I look at his account and it's got $1500 in it.  The minimum loan amount is $1000 and the max is 50% of the balance.  Denied.

So the sharpie gets himself "fired" (I shit you not) and says gimme my money back.  He nets about $850 after taxes and the 10% early withdrawal penalty and complains about that, of course.

Few weeks later he gets himself re-hired and finds out he's gotta wait a year to be eligible to participate again.  More complaints, natch.

Nothing surprises me.  If people want to be stupid, be stupid.

FYI- if you take out a loan on your 401k and don't repay it the entire distribution is reclassified as an early withdrawal and you owe TAXES PLUS THE 10% PENALTY on it.  Don't take loans from your 401k.

Fri, 04/12/2013 - 09:57 | 3440475 Shizzmoney
Shizzmoney's picture


Don't take loans from your 401k.

Right! Just do what I did: withdraw the thing, pay the taxes, and take it to Atlantic City and proceed to win $5400 playing poker.

Best investment I ever made because I knew if I kept it in there, I would never see it (especially after reading the data on this site!).

Fri, 04/12/2013 - 10:07 | 3440518 NoDebt
NoDebt's picture

Hey, if you want out then that's the way to do it.  What I'm saying is don't fiddle-fart around with loans.  If your fear is that the government is going to take everything in your 401k then having loans out against it isn't going to help you- you're still going to owe the money even if they take everything.  Just that you won't be paying yourself back any more- you'll be paying the government.

Remember that 401k plans only exist because the government allows them to.  They're ERISA plans and like any government sponsored program they're a fucking mess of rules and regulations.  In such situations struggling and flipping around in and out of things, changing your mind again and again just makes you sink in the quicksand faster.  Make your plan, stick to it.

Fri, 04/12/2013 - 10:03 | 3440511 LFMayor
LFMayor's picture

as opposed to getting none of it.


I've been holding my mortgage payment.  On the 3rd month, I get the nasto-gram from the lender institution.  Now I have a "qualifying circumstance" in my 401k plan lingo.
fax the letter in with the "Please may i have more of my own porridge" form and its... magic: mortgage paid via 401k monies that otherwise I wouldn't have been able to touch.  Rinse, repeat.

One fucking institution get's paid with fiat from the other.  And I use windfall to buy [Some Things] that won't electronically evaporate.   

My 401k plan, Hewitt, has even streamlined the process, due to hits.  A year ago you had to call the service number and talk to a representative to get the most holy annoiting and approval.  Now you just print the damn form off and fax your shit in.

Fri, 04/12/2013 - 10:18 | 3440550 NoDebt
NoDebt's picture

You actually intentionally triggered the "to avoid foreclosure on your primary residence" clause?  Holy shit, that takes some balls.  I assume you don't have much need for credit other than your mortgage.

If I could make a suggestion- you probably shouldn't participate in your 401k.  Pay the taxes, take the money home with you and use it for whatever you choose from there.  That's a lot of gyrations just to pay a mortgage.

Fri, 04/12/2013 - 10:21 | 3440610 LFMayor
LFMayor's picture

LOL, thanks, but yeah man, it was the only way.  That or do a can-opener dive off a step ladder every 3 months and get a knee replacement.

The damn plan doesn't permit withdrawal unless of medical, educational, new primary residence or "hardship".
So you can take 50% loan, but after that you're pretty much locked.
It worked out to 3 months because that's what Regions would tolerate before the letter showed up with the desired verbiage.  First and second month you get warned, but that 3rd month letter contains the magic words "foreclosure proceeedings" and that's what Hewitt wanted to see before they'd approve the 401k withdrawal.

and yeah, I'm not contributing now, in fact for the past 2 years.  Was a kool aid drinker until about the time I came here to ZH.  The siren's song of "company match"sure does seem like a good deal when you're younger and dumber.  Mother Fuckers.


Fri, 04/12/2013 - 10:22 | 3440626 Seasmoke
Seasmoke's picture

I like this post the best. Kudos LFM

Fri, 04/12/2013 - 10:07 | 3440521 Caveman93
Caveman93's picture

Don't take loans is damned good advice. I say don't play the game at all and then there won't be an issue. By the way those penalties are menial in comparison to the food inflation I've experienced over the last 25 years. 

ERISA was just another damned scheme for pooling money for fund managers to gamble with. My pie charts only go up? Sick of these God Damned useless fucking colored pie charts!!!

Fri, 04/12/2013 - 10:26 | 3440635 prodigious_idea
prodigious_idea's picture

If someone truly believes the govt will confiscate their 401(k), then they should do much more than not participate in a 401(k) plan.  Otherwise, and for most plans, there's an employer match on your deferral - typically averaging %50 up to a 6% deferral.  Notwithstanding a discussion about the loss of capital gain treatment on your account or increased tax rates on later-in-life distributions, you get a 100% return on your first 3% deferral.  I'll recommend that every time.  Loans?  Sure, if the purchase makes sense.  And why not pay yourself the NIM and take the business from the banks at the same time?

Fri, 04/12/2013 - 10:14 | 3440567 Awakened Sheeple
Awakened Sheeple's picture

Well, one needs to make the decision based on their own financial situation. Be aware of what could happen if things turn south. I took out my 50k loan as well. Distributed some to physical cash, physical pms, and left some to play the casino. Shit goes bad, I'll have enough to cover the penalties but at least a portion of it is out of the system. Fuck the banks - starve the beast.

Fri, 04/12/2013 - 09:52 | 3440461 chinaboy
chinaboy's picture


Fri, 04/12/2013 - 09:54 | 3440466 Shizzmoney
Shizzmoney's picture

I see this as a good trend actually.

In fact, employees cashing out their 401(k) when they leave an employer are a greater concern. Those dollars are often spent whereas with loans the funds are often repaid and stay in the retirement nest egg.”

Oh noes!  How else are you gonna hit your bonus, Mr. Retirement Fund Manager!

The less money there is in these toxic institutions, the better.  Albeit, the reason why people are doing this is for emergency cash.

But at least the cash will actually hit their hand.

Fri, 04/12/2013 - 09:54 | 3440473 BullyBearish
BullyBearish's picture

Doing our patriotic duty, as forced by our masters: BORROW and SPEND!!!

Fri, 04/12/2013 - 10:02 | 3440495 Confundido
Confundido's picture

The first step is to force feed your 401Ks with govt bonds. The second step is to default on them! Oh, I am sorry Mike Norman, the US govt will not default because they will print the USDs? Hopefully those will be worth an icecream scoop on July 4th of 2019!

Fri, 04/12/2013 - 10:02 | 3440507 Gmacks
Gmacks's picture

I'm 26 and I took a loan out on my 401k. I bought silver ;-)

Fri, 04/12/2013 - 10:24 | 3440633 LFMayor
LFMayor's picture

Run brother, run.  I wish I'd had a heads up at 26.

Fri, 04/12/2013 - 10:06 | 3440513 buzzsaw99
buzzsaw99's picture

Those who cashed in Q1 of 2013 were the smart ones.

Fri, 04/12/2013 - 10:07 | 3440517 adr
adr's picture

This news should be enough to make Maria Bartiromo do a Brandy Chastain, run across the CNBC floor, drop to her knees and rip off her shirt to reveal a t-shirt with BULLISH!!! printed across the chest.

Fri, 04/12/2013 - 10:11 | 3440523 Son of Loki
Son of Loki's picture

The two friends who just closed up their stores due to the serious increase in postal rates, health care premiums, etc are jobless now and told me they need to tap into their 401s for survival until they find a job.


Bad news. BTW, no more home repairs, no more iPads, etc. for them or their kids.

Fri, 04/12/2013 - 10:11 | 3440541 khotel
khotel's picture

I'd like to hear some details from those who have taken loans and/or cashed out their IRA entirely. What are the pros/cons of each?   What actual rate do you pay on your IRA cash-out in addition to the 10% penalty?  Also, I have to wonder if you'll see a "debt forgiveness" plan being discussed for those who have taken loans out against their 401k plans like you see for home loans and student loans. 

Fri, 04/12/2013 - 10:48 | 3440763 buddybear
buddybear's picture

I cashed mine out in 1999 and bought some acerage in the mountains. I was certain the market was going to crash. It did and I didn't. I held the land for 4 years as the properties around me were developed and sold at a 3x increase. I bought a smaller piece of land with a house and went into business for myself in 2003. I own my home and owe no one. I raise 85% of what I eat and I could eat only what I raise. I get up at 4:30AM, milk my cows, have breakfast, got to work, come home, milk my cows and do rest of chores (feed pigs and chicken or garden) have dinner. Next day I start all over. I have a modest savings (not in a bank or in paper) and I don't plan on retiring until I am no longer phiscally able to work. "Live a simple and humble life, working with your hands and be dependent on no one."

Fri, 04/12/2013 - 10:56 | 3440825 LFMayor
LFMayor's picture

that's totally gtg bear, i'm freakin green with envy.  I wish I'd been awake in '99, too man.

Fri, 04/12/2013 - 10:56 | 3440822 prodigious_idea
prodigious_idea's picture

It's simple.  If you can borrow from yourself at a rate lower than a bank, it's worth the consideration.  But whatever you're buying should be important because you'll pay 5% or more on the loan (to yourself by the way) and you'll have payroll deductions to repay the loan (and you can't pay down, only pay off if you do anthing but automatic payroll deductions).  Plus there's usually a small loan fee ($50?).  No penalty/tax impact to borrowing - only early distributions.  Debt foregiveness?  Why would the govt forgive a debt you have to yourself?  The only reason would be to eliminate the inclusion into income - taxability - that someone described above.

Fri, 04/12/2013 - 13:24 | 3441767 GraveyardSpiral
GraveyardSpiral's picture

@khotel:  Cashed mine out in January.  If you live in Virginia, the broker is NOT required to withhold either your tax bracket amount NOR the 10% penalty.

So, I have ALL of my money until April 2014.  Who the fuck knows what may come by then so I wont worry about it till......

Fri, 04/12/2013 - 10:12 | 3440552 CashCowEquity
CashCowEquity's picture

Im self employed. Fuck a 401-k. Roflmfao !

Fri, 04/12/2013 - 10:32 | 3440686 NoDebt
NoDebt's picture

If you're 1099 you can set up an individual 401k, complete with higher contribution limits and no income limitations, unlike crappy IRA limits.  Schwab, TD- any of them could hook you right up.

But the government is going to take all your money anyway, so who the fuck would want to do that?

Fri, 04/12/2013 - 10:12 | 3440561 buzzsaw99
buzzsaw99's picture

Money in a retirement account is money held hostage by maggots.

Fri, 04/12/2013 - 10:13 | 3440565 Inthemix96
Inthemix96's picture

Some fucker from J6M on here the day?

Whatsamata junker?  The cat got your fucking tongue?  If thats all you can do is down vote, you are gonna be skinned alive when the fun starts.


Fri, 04/12/2013 - 10:23 | 3440623 TheProphet
TheProphet's picture

Those who still have a 401k are not using it as an ATM per se.

They are borrowing from it because they have job security and can pay themselves back with interest, tax free.

It is a way to earn a return on your 401k, or at least to increase contribution levels.

Fri, 04/12/2013 - 10:25 | 3440639 Bicycle Repairman
Bicycle Repairman's picture

All they want is for someone, anyone to liquidate your assets.  They don't care who does it.  They'd prefer not to do it.

They won't have to seize your 401K, because you'll seize it and sell it.

They won't have to seize your gold, because you'll seize it and sell it.

They won't have to seize your guns, because you'll seize them and sell them.

They won't have to seize your preps, because you'll seize them and sell them.

Keeping these things in your possession requires more than merely hiding them.

Fri, 04/12/2013 - 10:27 | 3440649 Winston of Oceania
Winston of Oceania's picture

We use ours for capital investment, pay ourselves interest, stay out of the rigged casino and best of all it is not money created out of thin air, at least in my plan.

Fri, 04/12/2013 - 10:31 | 3440677 Bicycle Repairman
Bicycle Repairman's picture

Clearly you have a plan that works.  Most people do not.

Fri, 04/12/2013 - 10:52 | 3440790 GeorgeHayduke
GeorgeHayduke's picture

Considering the negative votes it appears you understand the owner's scheme better than the usual bunch of know-it-all knuckleheads who troll these boards. Even though most think they have it all figured out, they don't like seeing any possible opinions, let alone potential truths, that might contradict their beliefs. They just know they will have Gawd, Guns and Grub to use against people they hate when the shit comes down.

Fri, 04/12/2013 - 10:25 | 3440641 GeorgeHayduke
GeorgeHayduke's picture

The criminals better get to confiscating the 401 (k)s before everyone spends them to keep their house, eat food, etc....

Fri, 04/12/2013 - 10:29 | 3440652 sundown333
sundown333's picture

The sheeple are still using their assets like an ATM. I have a neighbor who went out to get a few "household tools" one day and came home with a $1200 mechanics tool box set and $2000 Mechanics tool set from sears. That was 15 years ago and the man has still never used 99% of the set. I asked him once if he has ever changed his own oil or spark plugs and he told me he does not know how.

Two years ago this same man has a toilet go bad on him and spent like $12,000 on a complete bathroom overhaul. I asked him if he was having major problems with the bathroom or if he was tired of the colors. He told me that there was no problems other than the toilet and had white tiles removed and replaced with white tiles and the same colors but did have a stone sink top installed.

Most of us are living large today like our hard working parents could only dream of and its still not good enough. People are spending money today like they have their own printing press in the basement. Well, I guess they don't need that since their home is an ATM!

What was that question about spending retirement money to maintain a lifestyle?

Fri, 04/12/2013 - 10:40 | 3440723 prodigious_idea
prodigious_idea's picture

Is the bold type for your eyes or ours?

Fri, 04/12/2013 - 10:36 | 3440705 MrBoompi
MrBoompi's picture

Hey kids....start getting those rooms ready for your parents now.

Fri, 04/12/2013 - 10:59 | 3440857 mendigo
mendigo's picture

That's a two way street - actually I suspect the reverse is more common.
There was a time when a young person willing to work hard could expect to live comfortably and raise a family.
Now we are experiancing the poverty/color tv effect - I can't affort a decent home but I can finance a new iphone!

Fri, 04/12/2013 - 11:04 | 3440906 LFMayor
LFMayor's picture

damn straight!  Need someone to load mags and slap hot iron to wounds, if you've watched "Josey Wales" you'll know what I mean.

Fri, 04/12/2013 - 10:47 | 3440761 sundown333
sundown333's picture

The bold type is for mine. Getting old. Sorry

Fri, 04/12/2013 - 10:56 | 3440810 wagthetails
wagthetails's picture

I used to be against this...but you mind as well spend it before they confiscate it.

Fri, 04/12/2013 - 11:28 | 3441097 waterhorse
waterhorse's picture

 “In fact, employees cashing out their 401(k) when they leave an employer are a greater concern."

Yeah, I bet it's a "great concern" to the banksters who won't be able to get their filthy hands on it.

Fri, 04/12/2013 - 11:52 | 3441198 creeko
creeko's picture

My 401K consists of little, round ouncy things.  :) 

Fri, 04/12/2013 - 11:54 | 3441214 F.A. Hayek
F.A. Hayek's picture

Living below your means seems to be a concept that's completely foreign to most Americans. The community on the site below tends to take the concept to an unprecedented level, and I say all things in moderation, but the concept of making do, using it up and wearing it out is sound.

Fri, 04/12/2013 - 12:28 | 3441466 FreeNewEnergy
FreeNewEnergy's picture

Recently, I've begun to feel good about never saving any money, in or out of a 401K. I'm pushing 60, and all my money is tied up in cash, silver, land.

No mortgage.

My sister is telling me that the first of her three daughters is heading to UofMich at a cool $52K per year. Taking out loans. Poor kid is smart, but she's headed for serious debt slavery.

Glad I never had kids. Figured I couldn't afford them and I was right.

Hmmm... almost time for a libation or eight.

Fri, 04/12/2013 - 12:57 | 3441632 The Matthaus
The Matthaus's picture

401k rate 4-5%, Studentloan Rate - 8%, and with lots of big companies that match contributions, easy way to lower your rates.

Fri, 04/12/2013 - 13:05 | 3441670 ItsDanger
ItsDanger's picture

How much is due to concerns govt will raid the 401ks?  Or is it just cash flow issues?   I suspect 25/75 split.  Either way, its a major red flag.  Anyways, the clowns on CNBC are telling everyone to buy.

Fri, 04/12/2013 - 14:27 | 3442041 mickeyman
mickeyman's picture

I'd say for most its cash flow.

I started doing it because in Canada you can get terrible clawbacks on your old age pension when you withdraw money from retirement accounts. 

Fri, 04/12/2013 - 14:24 | 3442029 mickeyman
mickeyman's picture

It's good to know I'm not the only one doing this

Fri, 04/12/2013 - 14:58 | 3442200 moneybots
moneybots's picture

"...those with at least one loan outstanding had an average balance in their retirement plan of $7,764!"


I read a few weeks ago, that people need some 750,000 for retirement. 

Mon, 04/15/2013 - 07:17 | 3449106 Tom.the.Bomb
Tom.the.Bomb's picture

Factor in “Means Testing”… and you lose !  Again !  7% modeling (until you read the small print) to funny.  The commercials shows, shiny teeth, green grass and grandchildren hugs… etc.  Spades anyone?  As in calling a 401k what it is, was and will never be.  A leverage gimmick for the financiers that know how to ring stock options out of “investing” in the “shit that we see”… not for profit sake, but impression sake.  Happy Monday   

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