20% of workers still using traditional plans
San Francisco, CA -- (SBWIRE) -- 01/23/2013 -- There is an ever-growing number of American workers that are beginning to tap into their retirement savings before they are actually retired. This trend is based primarily on the economic slumping that has persisted for the last half decade.
The Washington Post has report that over 20% of workers with a 401(k) plan or other retirement plans are cashing out their respective deals or taking loans against them in order to pay for basic needs.
The Washington Post has also reported that based upon a study soon to be released by HelloWallet, more workers are siphoning a quarter of an estimated $293 billion that they and/or their employers pay into the retirement plan each year.
The money is said to be put toward paying off mortgages, keeping up with medical bills, paying off college tuition, or staying afloat with credit card debt and other piling expenses.
The Obama Administration has been recently signaling its willingness to reduce the cost-of-living increases for Social Security recipients, as well as raise the Medicare eligibility age two years. Such moves could mean some severe hardships for particular workers, and especially for those who are already struggling to make it to their current retirement goal.
HelloWallet by Vanguard has provided data on the largest managers of 401(k) accounts, which have expressed that the number of workers siphoning from their own accounts has grown by 12% since the 2008 start of the recession.
Nearly 33% of the workers in their 40s are taking out of their 401(k) and equivalent accounts.
Low-income workers are most probable to cash out retirement plans in order to pay for per-retirement expenses. According to the HelloWallet data, nearly 30% of the households earn less than $50,000 per year, while 8% of households were forced in one way or another to take out more than $150,000 from their respective funds.
According to a recent survey of 110 larger employers conducted by Aon Hewitt in 2010, 33% of those enrolled employees had an outstanding loan against their retirement plan they enrolled for. A whopping 7% noted “hardship withdrawals”.
There are only 20% of current workers enrolled in the traditional pension plans. New hires are now rarely offered pension plans, and employers are simply waiting out older workers with benefits, sometimes attempting to offer them buyout options.
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