Americans are raiding their 401(k) plans to pay for current expenses. Approximately 25% of Americans with 401(k) plans have been withdrawing money to pay current needs. Sixty billions dollars has been withdrawn this past year from 401(k) plans to pay for current expenses such as mortgages, credit card obligations and car loans.
Retirement Funds Are Evaporating
In a recent study the online financial guidance service, HelloWallet, found it is becoming more and more difficult for Americans to save money for retirement. Americans have been raiding their retirement accounts prior to retiring. The borrowing of funds from retirement accounts has reached all-time highs. Financial advisors agree that taking money from 401(k) plans prevents the accumulation of funds necessary to secure Americans in their retirement years.
In most situations if you take funds from a 401(k) plan prior to being 59 ½ years old you have to pay a 10% penalty plus all of the taxes that haven’t been paid over the life of the account. Although there are borrowing provisions in most 401(k) plans, these borrowing provisions are only for hardship situations.
A recent study found Americans who are over 50 years of age have an average combined balance of credit cards of approximately $8500. This is up more than $2000 from 2008. Studies have also found approximately 25% of older Americans have used their retirement funds to pay down current debt on their credit cards.
About the Author
Elliot S. Schlissel is a member of the National Academy of Elder Law Attorneys. He provides estate planning legal services, Medicaid planning and estate litigation legal services for his clients. Elliot and his staff of attorneys also draft wills and trusts for their clients.
