Source: Zerohedge
Inflation-Battered Americans Raiding 401k’s To Pay Mortgages And Rent
- In the latest sign of an economy edging deeper into troubled waters, more Americans are raiding their 401(k) retirement accounts to cover basic living costs, according to data released by Fidelity Investments on Monday.
- “Americans outside the wealthiest quintile have run out of extra savings generated early in the pandemic and now have less cash on hand than they did when the pandemic began,” notes Bloomberg‘s Alexandre Tanzi, citing Fed data.
- According to Fidelity, 2.3% took a hardship withdrawal in the third quarter, up significantly from the 1.8% rate observed in the same quarter of 2022. The top two reasons given for the third-quarter hardship withdrawals: avoiding foreclosure/eviction, and medical expenses.
- Withdrawals aren’t the only way to crack the 401(k) piggy bank. Fidelity says 2.8% took loans from their retirement balances, up from 2.4% last year. Even more concerning: Fully 17.6% of workers now have an outstanding loan against their 401(k).
Source: zerohedge.com
Inflation-Battered Americans Raiding 401k’s To Pay Mortgages And Rent
In the latest sign of an economy edging deeper into troubled waters, more Americans are raiding their 401(k) retirement accounts to cover basic living costs, according to data released by Fidelity Investments on Monday.
“Americans outside the wealthiest quintile have run out of extra savings generated early in the pandemic and now have less cash on hand than they did when the pandemic began,” notes Bloomberg‘s Alexandre Tanzi, citing Fed data.
According to Fidelity, 2.3% took a hardship withdrawal in the third quarter, up significantly from the 1.8% rate observed in the same quarter of 2022. The top two reasons given for the third-quarter hardship withdrawals: avoiding foreclosure/eviction, and medical expenses.
Withdrawals aren’t the only way to crack the 401(k) piggy bank. Fidelity says 2.8% took loans from their retirement balances, up from 2.4% last year. Even more concerning: Fully 17.6% of workers now have an outstanding loan against their 401(k).
Withdrawals and loans aren’t just a sign of an increasingly troubled economy — since they sap retirement savings, they also portend a weaker financial future for the growing number of individuals using those features.
Look for the hardship withdrawal rate to keep increasing, and not just for economic reasons: Starting in 2024, a new rule will allow withdrawals of up to $1,000 for emergencies without being subject to the 10% under-59 1/2 penalty. Unlike hardship withdrawals today, participants will be allowed to repay these sub-$1,000 withdrawals back into their accounts over three years. With empathetic intentions, Congress may instead be enabling financially destructive behavior.
IRS rules allow hardship withdrawals for “an immediate and heavy financial need.” Unless it’s from a Roth account, these withdrawals are subject to taxation, including a potential 10% penalty for those who haven’t reached age 59 1/2.
401(k) loans sound more benign– and they can be — but they have their own disadvantages. For example, the interest you pay “to yourself” comes from money that’s already been taxed, and you’ll pay tax on it again when you withdraw it in retirement. Also, if you don’t pay them back on time — or before changing jobs — loans will be re-characterized as distributions subject to income taxes and the 10% penalty.
Avoiding the need to tap retirement savings starts with building an emergency fund: Financial planners typically recommend having the equivalent of three to six months of living expenses in a liquid account such as a money market mutual fund. However, a January Bankrate survey found that 57% of American adults aren’t even able to cover a $1,000 emergency expense. That percentage has almost certainly risen in the intervening 10 months.
In a separate Fidelity survey, 8 out of 10 workers said inflation and the cost of living are causing them stress, with half saying it’s enough to cause them to be distracted on the job.
READ THE COMMENTS
I absolutely love how all of the hazards associated with early withdrawls from retirement accounts revolve around government theft. A tax here, a penalty there. It’s almost as if it’s not your money.
Inflation-Battered Americans Raiding 401k’s To Pay Mortgages And Rent
Not trying to take away from the premise of this article (because certainly many people are taking these loans because they are under financial stress), but given that the interest that you pay on those loans goes toward your retirement as well (in essence you are paying it to yourself), some people are taking loans on their 401K’s and investing the proceeds in non-dollar denominated assets as form of diversification – that are not provided by their 401K plans.
A lot of 401k plans provide no access to precious metals, no access to commodities, no access to real estate, no access to alternative assets, because they are not self-directed. This means that they lock you into high-fee Wall-Street-controlled mutual funds run by tiny-hats that all golf together and buy the same overpriced crap stocks.
They lock you in to being the “bag holder” for the assets they have pumped up for their benefit, so that when they finally crash, you are trapped in, and they can get out.
teutonicate
Take it all out, pay the penalties, and never put it back into a 401k. Anyone with funds “saved” in there needs to give their head a shake, fast.
I’ve been trying to convince friends of this for a while, but then they took the clot shot and became automatons.
The American Consumer?
Stick a fork in ’em, he’s done.
It’s truly unbelievable how quickly a group of Psychopathic Communists have destroyed the greatest country in the world.
It hasn’t been great since, maybe, 1964? The year before we poured billions into Vietnam and invited hordes over our border with the 1965 Immigration Act and started Medicare.
The 1965 immigration act, you can thank Ted Kennedy for that disaster.
The Story of Daedalus: The Flight of Icarus.
I am reminded of the Greek myth of a father and son imprisoned together.
The father, a great craftsman, came up with an escape plan. He would build wings for him and his son out of feathers and wax to fly out of prison. On the morning of their escape the father warned the son not to fly too close to the ocean and get the wings wet. Nor to fly too high or the sun would melt the wax holding the wings together. But as they took off, the son became filled with hubris and began to climb higher and higher. His father yelled warnings but the son was overtaken by the sensation of flight and hubris and continued higher.
Then in seconds, the wax holding the wings together melted and the son fell thousands of feet to his death.
(MORAL of the STORY) As the Buddha warned. “The Middle Way is the best way to live.” Not too high, not too low. Not too little, not too much. Just be happy to escape their debt prison. Dont let sensation and hubris ruin a good escape.
THE END.
Not that he was elected, but rather installed, but for anyone that actually voted for Biden…you’re getting exactly what you fuking deserve.
“Americans outside the wealthiest quintile have run out of extra savings generated early in the pandemic“
I don’t know how many times I have heard that ridiculous statement, are these writers on drugs?
Please tell me how exactly anyone put money into their savings during the covid hoax?
Some of us kept our jobs but many did not and many of those who did stay working were operating on less hours.
Are these people talking about the tiny amount of stimulus cash the gov dribbled out? That amounted to practically nothing.
The fake pandemic certainly didn’t do the economy any good but it really has little to do with the current march towards the collapse. The gov green energy moves along with the fact that we are 33 trillion in debt and the gov can’t even make interest payments on that debt is what is driving this.
There will be a total economic collapse of the west and we won’t even be a first world country after it happens. You ain’t seen nothing yet.
This continues to get worse as time goes on. Much, much worse.
Please tell me how exactly anyone put money into their savings during the covid hoax?
Selling puts and buying calls was very profitable.
We have had to use savings. But what bothers me more than anything is that we live a country that has so much hatred. We have murderers, rapists, pedophiles, all monsters. Bill Gates & Soros as the owners of more of the available land in the U.S. We were all asleep or just living our lives. There’s one man that was asked to help save this country. We aren’t there yet but now we have a chance. Why do you think so many love him & the crowds go to his rallys? No, he isn’t our ” Savior” but he has done so much more than ppl know. When he ran for POTUS in 2016 I couldn’t stand listening to this man brag. (They all do when running for an election). But Trump was different. Bold, brazen, no fear & willing to take on the corruption. They tried daily to get him. Remember the lovebirds in the WH texting about him? They couldn’t stand the thot of him winning. They tried to kill him. Remember HE WAS ASKED. He did not have to take it on. But he has love of country just as most of us do. He wanted his grandchildren & the great grandchildren to live in a peaceful world and be free. I hope one day you do see it & be grateful because we needed someone up to the challenge.
My husband and I have never made a lot of money therefore we have not picked up heavy spending habits. But recently I asked myself why we were so strapped…well duh…Bidenomics. I’m applying for my social security to help bridge the gap.