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  1. #1 More dip early into funds for retirement 
    More dip early into funds for retirement
    Hardship withdrawals can cause long-term jeopardy

    By Ross Kerber
    Globe Staff / June 6, 2008

    Record numbers of Americans are raiding their retirement savings as the economy has soured, threatening their long-term financial security to make their mortgage payments, pay medical bills, and cope with rising food and fuel costs.

    Three decades ago, individually controlled retirement plans like 401(k)s barely existed. Most Americans counted on a pension, with funds contributed and managed by their employer, to provide for retirement along with Social Security payments. But today, workers have accumulated $3 trillion in 401(k) accounts - up from $1.6 trillion in 2002 - making them a tempting target for households looking to get through tough times.

    The three largest administrators of 401(k)s - Fidelity Investments, CitiStreet, and Vanguard Group Inc. - report a growing number of early withdrawals from the plans in the past year as saving for retirement has taken a backseat to mortgage payments, medical bills, and rising food and fuel costs.

    At Fidelity of Boston, the largest retirement plan administrator in the country, the number of people making hardship withdrawals rose 17 percent last year. At Vanguard, hardship withdrawals rose 16 percent in 2007, to 47,197. The share of all custom ers making hardship withdrawals remains relatively low, however; at Vanguard, 1.5 percent of customers made early withdrawals last year, up from 1.2 percent in 2002.

    "It's another measure of economic stress among households," said Stephen Utkus, retirement research director at Vanguard in Pennsylvania. "I suspect you'll see people dropping out of 401(k) plans or ending their contributions because they can't afford to save."

    Fund executives link the withdrawals to the slowing economy. "We're hearing everything from 'my gas bills are too high' to 'I'm going to a funeral and need to pay for a plane ticket,' " said Bob Gonzalez, who manages a call center for the retirement services group of Wachovia Corp.

    James Olson, a minister of the United Church of Christ, lost his position at Boston University last summer, and his job search has taken longer than expected. To meet expenses like the rent on his Jamaica Plain apartment, Olson raided his 401(k) retirement savings account. Olson, 39, said retirement is too far off for him and his husband to think about now. "We did what we needed to do to keep going," Olson said.
    This is not good at all. :eek:

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  2. #2  
    Senior Member LogansPapa's Avatar
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    No worries. The economic stimulus package check is on its way. There will be a nice Ďbumpí just prior to the elections and GWB wonít have to worry about the "R" word being recorded into his legacy. Allís well.

    At Coretta Scott King's funeral in early 2006, Ethel Kennedy, the widow of Robert Kennedy, leaned over to him and whispered, "The torch is being passed to you." "A chill went up my spine," Obama told an aide. (Newsweek)
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  3. #3  
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    It's nuts not to save and invest for the future. Sometimes you have to cut current expenditure to do so, but you should never stop. And the government rightly makes it expensive to tap your 401(k).
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  4. #4  
    noonwitch
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    I'm glad that I have a stable government pension-if all goes well, I'm retiring in 11 years, 4 months. I can substitute teach after that.
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  5. #5  
    Quote Originally Posted by linda22003 View Post
    It's nuts not to save and invest for the future. Sometimes you have to cut current expenditure to do so, but you should never stop. And the government rightly makes it expensive to tap your 401(k).
    Absolutely! Personally, I'd lose the DTV and quit going to restaurants and buying nonessentials first. Gutting your retirement accounts is just a temporary fix anyway. Downsizing and budgeting is a better solution.
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  6. #6  
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    Sadly, with the relatively small amounts most Americans have invested, it probably doesn't matter if they tap their accounts.
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  7. #7  
    Quote Originally Posted by linda22003 View Post
    Sadly, with the relatively small amounts most Americans have invested, it probably doesn't matter if they tap their accounts.
    This drives me crazy. In 10 or 15 years all those same people will be living off dog food because the flat screen TV and the spa vacation were more important than the IRA.
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  8. #8  
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    Quote Originally Posted by Gingersnap1 View Post
    This drives me crazy. In 10 or 15 years all those same people will be living off dog food because the flat screen TV and the spa vacation were more important than the IRA.
    Or they'll be voting for higher rates of taxation on those of us who planned for the future.
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  9. #9  
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    Quote Originally Posted by Gingersnap1 View Post
    Absolutely! Personally, I'd lose the DTV and quit going to restaurants and buying nonessentials first. Gutting your retirement accounts is just a temporary fix anyway. Downsizing and budgeting is a better solution.
    Doing without and buying most things with cash is something most people do not understand. Saving for a rainy day does not exist either. My parents grew up in the depression. They financed their first house and paid cash for two more. They never paid interest on anything else.

    The Prez and all of our politicians encourage us to spend, spend, spend. Take the stimulus rebate. The government's worst nightmare would be if everyone would either save that money or pay down bills.
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  10. #10  
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    Quote Originally Posted by noonwitch View Post
    I'm glad that I have a stable government pension-if all goes well, I'm retiring in 11 years, 4 months. I can substitute teach after that.
    We don't have a pension, just the 401k, which I think will probably go down a lot today. Saw there's almost a 300 point drop on the Dow Jones today.

    Sounds like you have a good financial plan going. Congrats on being able to retire so early.
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