Americans Are Dipping Into Retirement And 401(k) Savings To Make Ends Meet
The financial crisis of a few years back hit Americans hard. Almost everyone can name a friend or a loved one who was without work and struggling to pay the bills during that time. In the short-term, unemployment kicked in to soften some of the blow, but unemployment was nowhere near able to cover the full array of expenses at the same level as that individuals lifestyle. Let’s just say that a couple worked for a major corporation and were laid off in 2008. Prior to being laid off they made decent money, and lived rather lavishly, including a nice home with a rather hefty mortgage. With their unemployment check being small in comparison to their income, the couple had no choice but to either sell their home or borrow from their 401(k) to pay their mortgage. With the housing market the way it was, selling the house and downgrading was also not an option.
1 In 4 Americans Are Using Their 401(k) Retirement Savings To Pay Bills
The above scenario is unfortunately not isolated. Currently, 1 in 4 Americans are raiding their retirement plans to pay their bills. Layoffs with mounting bills and credit card debt present few alternative options. Over 70 billion dollars have been withdrawn from 401(k)’s to try to pay for current every day expenses. The truly sad part is that taking a loan from a 401(k) is not the same as going to the bank and withdrawing money. There are penalties, taxes and other fees that are taken from a 401(k) as a result of an early withdrawal. Suze Orman of the “Suze Orman Show” commented: ”If they cannot pay their bills while they have a paycheck coming in, how do they think they’re going to pay those exact same bills later on in life when they no longer have a paycheck coming in?” said Suze Orman, host of CNBC’s “The Suze Orman Show.” “It makes no sense in any circumstance to take a loan from a 401(k).” But if someone’s deciding between drawing from retirement or a bankruptcy, what are their options?
Debt Is Worse Among Those Nearing Retirement, Retirement Savings Are At All Time Lows
The AARP statistics show that those who are 50 and older have higher credit card debt than previous years, and higher debt compared to their younger counterparts. On average someone 50 and older will owe $8,278 whereas someone younger may only owe $6,258. That couple with fewer work years remaining to recoup finances and put aside money for retirement, puts soon to be retirees in a precarious financial position. In addition, having more credit card debt, puts these 50 something individuals at a much higher likelihood to borrow from their 401(k)’s.
Life has been difficult financially for many Americans since the Financial crisis struck several years ago. Many have still not recovered financially, and retirement is truly in jeopardy. Who is going to pay for retirement, if Americans are too strapped to save adequately? For more information on how to protect yourself and your own retirement savings, and to make decisions today to reform your spending and savings habits, speak to a Redhawk Financial Advisor near you today.