Thursday, January 17, 2013

Americans drawing down 401k's for non-retirement needs in record numbers, paying up to 45% penalty, coinciding with long term unemployment, early retirement, or disability. Along with 0% on passbook savings, millions who played by the rules all their lives face 'shocking poverty'-IBD editorial

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1/16/14, "President Obama's Cat-Food Future For Retirees," Investors Bus. Daily Editorial

"Americans are drawing down their 401(k)s for nonretirement needs in record numbers, just as Social Security goes bust. This portends poverty for millions as the White House fiddles. Cat food, anyone?
 
One out of four U.S. workers with 401(k) retirement savings accounts has been forced to cash them out or borrow from them at high costs just to stay solvent.

The Washington Post, citing a report from financial advisory firm HelloWallet, said the withdrawals have drained $70 billion, or an astonishing near-quarter of the total $293 billion, in America's retirement accounts 

"undermining already shaky retirement security for millions of Americans."...

Some 69% of retired workers already are dependent in "major" part on Social Security as their main retirement income, according to a 2012 study by the Employee Benefit Research Institute, with worker savings off sharply for those in the below-$35,000 income bracket.

Why is this happening? It's tempting to blame workers financial incompetence for these early cashouts, as some of the Post's quoted experts do. 

But harder evidence points to Obama's economic policies.

For one thing, jobs remain scarce.

A tax penalty for withdrawals as high as 45% suggests workers are most likely to be cashing out from necessity, not irresponsibility.  

The withdrawals coincide with a sharp rise in workers taking early retirement or going on disability 

simply because they can't find jobs and their unemployment benefits have run out....

The Cato Institute notes that the Obama administration's high-tax, high-regulation, anti-business climate has depressed many stocks, which in turn has depressed the values of 401(k)s in addition to its tax hikes on capital gains. Worker pensions have been hit just as hard as "the rich," providing an incentive to withdraw from 401(k)s as investments decline.

Incredibly, the Democratic intelligentsia's response has been to declare that the withdrawals prove a need for a government takeover of private accounts.

Congressional Democrats constantly threaten to expropriate 401(k)s and replace them with Argentine-style "guaranteed retirement accounts." Alarmed savers on Internet financial bulletin boards have started talking of emptying their 401(k)s as a defense.

But the problem isn't financially foolish workers. It's bad policies that make the problems worse. And none of this is being discussed rationally in Washington. Even so, as sure as the sun will rise, it's a 

coming disaster for millions of people in America who will spend their retirements in shocking poverty." via Free Republic

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Ed. note: Not mentioned is the elimination of 3% passbook savings interest. It's the most obvious way to cause suffering among older Americans who did everything right their entire lives, lived conservatively, put money into savings with the idea that they would use that 3% for food. This very large group of Americans, which still includes WWII veterans, is despised by both Republicans and Democrats. Interest rates have been near 0% for several years and will continue as such indefinitely. The media would be screaming about this every day if a democrat wasn't in the White House. I haven't heard any Republican politicians demanding for it to end.

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P.S. Please excuse unpleasant white background behind part of this post. It was put there illegally by my longtime hackers.

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