25% in US have raided 401k's and paid huge penalties just to meet daily expenses or pay credit card debt

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2/10/13, "Nest eggs poached," NY Post, Gregory Bresinger, "25% of Americans, in dire straits, raided their 401(k)s"

"High unemployment and underemployment forced one in four Americans to pull money out of a retirement plan to make ends meet.

Not even the high penalties that make it prohibitive to tap into 401(k) accounts were a deterrent as a record $60 billion was yanked from nest eggs to pay for mortgages, car loans and credit card debts.

Those are some of the conclusions of a recent study by online financial-guidance service HelloWallet. The study shows that saving and retaining money for a secure retirement are becoming more difficult. 

The study shows that pre-retirees are breaking into retirement accounts, taking out billions of dollars. They are spending on average some 40 percent of the money that was supposed to be for their golden years on the here-and-now.

“Over 25 percent of households that use a 401(k) or a similar defined-contribution plan have used some or all of their retirement saving for nonretirement needs,” according to the report. The study relied on Census and Federal Reserve Board data. 

“This is a massive, systematic problem,” the report warned, “that now affects one out of every four participants on average, which is more like a gaping hole in the defined-contribution boat than a pesky leak.”

The report said that those most likely to “breach” their retirement plans — either borrow or cash out of them — are people in their 40s.

“By the time workers hit their 40s, they are highly likely to be burdened with mortgages and revolving credit-card debt and have kids in high school or on their way to college, creating the largest pressure to breach among any age group,” according to the study.

Breaching a 401(k) is usually a destructive move, advisers say. 

That’s because it hurts efforts to accumulate significant retirement assets. With a few exceptions, breaking into a 401(k) plan and cashing out before age 59.5 triggers a 10 percent penalty, plus a bill for all the investment taxes that haven’t been paid over the life of the account. 

401(k) participants can borrow from a plan for hardship reasons, but the loan must be repaid.

The draconian fees in one example show how desperate some people are. A 35-year-old unemployed male withdrew $36,000 from his defined-contribution fund to make mortgage payments to stave off foreclosure. The check he got after fees and penalties amounted to $11,800. 

Early withdrawls also interrupt the compounding process, which leads to money creating money. Compounding allows balances to grow at healthy rates. 

HelloWallet CEO Matt Fellowes said people should know the consequences of breaking into 401(k)s. “Most people are aware of what they’re doing but feel they have no choice. They have to pay for basic needs,” he said.

HelloWallet also discovered that 75 percent of people who cash out decide to do so “because of basic money-management problems.” 

Fellowes, citing Federal Reserve figures, said only 30 percent of Americans have a three-month cash reserve. They reluctantly conclude they must use retirement accounts. 

A separate study on credit-card debt done by Demos, which surveyed some 997 households, warns that middle-income households of those nearing retirement are running up huge credit-card bills.

According to the study, “Older Americans now have higher overall credit-card debt than younger people — a reversal of the trend Demos found in its 2008 survey.”

Those age 50 and over “now have an average combined balance of $8,278, compared with $6,258 for the under-50 population.”
Demos reported that a quarter of those over 50 said a job loss contributed to their credit-card woes. 

However, older Americans share one dubious characteristic with younger households — both are raiding retirement accounts, according to the Demos study. 

The survey said that 22 percent of older Americans — “more than one in five — used retirement funds to pay down current credit-card debt.”"

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Obama views retirement money others have carefully saved as his money. So he's going to "help" older Americans by taking over this money knowing many won't be able to eat without it. This is called genocide:

1/18/13, "Retirement Savings Accounts Draw U.S. Consumer Bureau Attention," Bloomberg, Carter Dougherty

"The U.S. Consumer Financial Protection Bureau is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency’s first foray into consumer investments.

“That’s one of the things we’ve been exploring and are interested in terms of whether and what authority we have,” bureau director Richard Cordray said in an interview. He didn’t provide additional details.

The bureau’s core concern is that many Americans, notably those from the retiring Baby Boom generation, may fall prey to financial scams, according to three people briefed on the CFPB’s deliberations who asked not to be named because the matter is still under discussion."...

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Ed. note: Before and after the 2008 election lifetimes of work and sacrifice were taken from older Americans via thug politicians. This crime was compounded by the genocidal installation of the zero interest rate. People had carefully saved to fund years in which they would be less able to be active. They counted on a 3% interest rate on their savings to pay for food or electricity. The loss of 3% interest guarantees suffering and premature death. I'm not the first person to call current US interest rate policy genocide:

11/2/12, “Chart Of The Day: America’s Geriatric Work F(a)rce,” Zero Hedge

“In other words, America’s elderly are not only not in a rush to retire, they are reentering the workforce (thanks to the Chairman’s genocidal savings policy which has just rendered the value of all future deposits worthless thanks to ZIRP), and in doing so preventing younger workers, in their prime years, from generating incremental jobs."...
 

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