According to a new study, more than one in four Americans with retirement savings accounts is raiding those funds before retirement just to pay the bills.
No more retirement money
Every year, about $70 billion is taken out of retirement accounts to pay for daily expenditures not linked to retirement, according to a HelloWallet study. The study showed that the worst comes from about a third of those in their 40s who take out cash for daily expenditures far too often.
The Financial services firm Vanguard also reports that the number of people taking loans or drawing funds from their retirement accounts has increased by 12 percent since 2008.
Evidently, people over 50 even have higher balances on charge cards than young people. People under 50 have an average $6,258 owed in credit card balances while people over 50 have an average $8,278 owed, according to AARP. It makes sense that older people can be tempted to take from retirement to pay that off.
Trend not a good one
Personal finance expert Suze Ormand explained that this can be a terrible trend that needs to stop. "If they cannot pay their expenses while they have a paycheck coming in, how do they think they're going to pay those exact same bills later on in life when they no longer have a paycheck coming in?" She added, however, that "It makes no sense in any situation to take a loan from a 401(k)."
Diane Oakley, executive director of the National Institute on Retirement Security, warned, "The savings in individual retirement savings accounts like 401(k) plans -- which already are severely underfunded -- continue to leak out at a high rate."
In addition to diminishing funds intended for retirement, early withdrawals often come with additional taxes and penalties, not to mention lost interest, reducing its value right out of the gate.
Customers have options
Consumer Amy Shankland explained that she had no other choice but to get into their IRA when her husband was let go. They had debts to pay and kids to feed, and she felt like there were no options.
"We didn't know what to do," she said. "It was either bankruptcy or cash in our IRAs."
Salary needed
About a third of people in the U.S. put $3.5 trillion into retirement accounts. About eight years of salary is needed to retire, most experts suggest.
No more retirement money
Every year, about $70 billion is taken out of retirement accounts to pay for daily expenditures not linked to retirement, according to a HelloWallet study. The study showed that the worst comes from about a third of those in their 40s who take out cash for daily expenditures far too often.
The Financial services firm Vanguard also reports that the number of people taking loans or drawing funds from their retirement accounts has increased by 12 percent since 2008.
Evidently, people over 50 even have higher balances on charge cards than young people. People under 50 have an average $6,258 owed in credit card balances while people over 50 have an average $8,278 owed, according to AARP. It makes sense that older people can be tempted to take from retirement to pay that off.
Trend not a good one
Personal finance expert Suze Ormand explained that this can be a terrible trend that needs to stop. "If they cannot pay their expenses while they have a paycheck coming in, how do they think they're going to pay those exact same bills later on in life when they no longer have a paycheck coming in?" She added, however, that "It makes no sense in any situation to take a loan from a 401(k)."
Diane Oakley, executive director of the National Institute on Retirement Security, warned, "The savings in individual retirement savings accounts like 401(k) plans -- which already are severely underfunded -- continue to leak out at a high rate."
In addition to diminishing funds intended for retirement, early withdrawals often come with additional taxes and penalties, not to mention lost interest, reducing its value right out of the gate.
Customers have options
Consumer Amy Shankland explained that she had no other choice but to get into their IRA when her husband was let go. They had debts to pay and kids to feed, and she felt like there were no options.
"We didn't know what to do," she said. "It was either bankruptcy or cash in our IRAs."
Salary needed
About a third of people in the U.S. put $3.5 trillion into retirement accounts. About eight years of salary is needed to retire, most experts suggest.
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