If the storyline being proliferated by the MSM and your politician leaders was true about a recovering economy, job creation, housing recovery and stock market boom, then why are a record number of Americans tapping their 401k plans to make ends meet? Inquiring minds want to know. I know people who are borrowing against their 401k plans to meet current obligations. How many of your neighbors are doing the same thing to maintain the appearance of normalcy? Are your neighbors tapping their 401k plans to make those lease payments on the BMW? Are they tapping that 401k plan so they can continue to eat out twice a week and keep shopping at Neiman Marcus? Or are they tapping their 401k plans to fill up their 10 year old Hondas and put food on the table?
Whichever scenario fits, they will have much less than they need during their retirement years. That is a no brainer. With 10,000 people per day turning 65 for the next 19 years and 40 year olds tapping their 401ks to get by, the chances of an economy growing above 2% over the next two decades is ZERO. Put that into your CBO model and calculate the national debt in 10 or 20 years.
Maybe this is actually rational thinking on the part of those withdrawing funds, since the government will be coming for those funds in the near future anyway.
More than 25 percent of Americans raiding 401(k)s to pay bills
U.S. workers are tapping into nearly a quarter of the $293 billion placed into their retirement savings each year to pay for mortgages, credit cards and other debts, according to a report from financial advisory firm HelloWallet. Those in their 40s are the most frequent raiders, with about one-third using their 401(k)s to pay current bills.
Other studies bear out those results. Vanguard, an investment-management group, said American workers withdrawing money from 401(k)s or taking out loans against their accounts jumped 12 percent since 2008.
Draining funds that ensure security when workers retire has raised new worries about the shaky foundation for older Americans.
Many workers use loans that incur large penalties to dip into retirement accounts. In addition to paying income taxes, many are hit with a 10 percent tax penalty.
Matt Fellowes, chief executive of HelloWallet, said there are few winners in that situation.
“What you have is 401(k) participants voting with their wallets, saying they would much rather use their money for other purposes,” Fellowes told the Washington Post. “I don’t think this can be ignored. Employers are dramatically overpaying for retirement, but it is not benefiting the employee.”