Seems more and more folks are raiding their 401(k) accountsto pay their bills these days. It's not a new thing, CNBC also had a story about this back in January:
One in four Americans is raiding their meager retirement savings to pay their monthly bills, according to a new study.
When Amy Shankland's husband, John, was laid off from his job, they tapped into their IRAs to get by. With credit card debt, big medical expenses, and two young sons, the Shanklands had few options.
"We didn't know what to do. It was either bankruptcy or cash in our IRAs," Amy Shankland told NBC News.
The Shanklands are not alone. Americans are borrowing against their 401(k) to pay for non-retirement needs such as mortgages, credit card debt or college tuition, according to a new studyfrom financial advisory firm HelloWallet. That amounts for more than $70 billion in annual withdrawals.
So as the Dow Jones hits record highs, realize that 25% of people with 401(k) accounts are missing out on those rallies, because they pulled their cash to pay off bills. Personally, I'm happy as all get out to see my retirement balances soar as the Dow skyrockets. I haven't had to touch my retirement funds, even during a brief period of unemployment last year.
Many others don't feel the same, thanks to the cruddy economy forcing them to make some hard decisions.
So what happens in 25-30 years, when those folks go to retire with a much smaller balance, and the viability of Social Security very much a real issue?
No safety net from a Social Security fund they paid into for their entire working lives, a smaller than expected retirement account, and a house which took an incredible hit in value for at least five years.
Not a pretty picture to look forward to.
