Savings Account & MMA Rates
CD (Certificate of Deposit) RatesHere’s a troubling report: More people are taking hardship withdrawals from their 401(k) plans, or borrowing against their retirement accounts.
According to Fidelity Investments, which administers 401(k) plans with 11 million participants, 62,000 workers initiated a hardship withdrawal in the second quarter.
That’s up from 45,000 in during the same three months (April through June) in 2009.
About 22% of all accountholders now have outstanding loans against their retirement accounts, up two percentage points from last year.
It’s pretty clear that too many Americans are still struggling to make ends meet.
Families bringing in less money due to layoffs, or cuts in pay or hours are tapping their savings to pay their bills.
Indeed, you aren’t even allowed to take a hardship withdrawal without being able to show a serious, immediate need for the money – such as saving a home from foreclosure or paying for critical medical care.
While we feel the pain their pain, we just hate to see those workers having to take money out of their retirement plans because:
- It’s no longer there to grow and contribute to their future financial security.
- Anyone under 59 ½ years old will must pay the deferred income tax on hardship withdrawals and a 10% early withdrawal
penalty. - Participants who borrow against a 401(k) plan and lose their job must repay all of that money right away or their loan becomes an early withdrawal and the must pay the deferred taxes and the 10% penalty.
- Desperate accountholders who spend all of their retirement savings trying to save a home from foreclosure are doubly screwed if they don’t succeed. Now they’ve lost both their home and retirement savings.
(5 votes, average: 4.20 out of 5)
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