Thursday, January 17, 2013

28% of Americans are Raiding Their 401k Plans

Millions of Americans are drawing down their 401(k)s for non-retirement needs in record numbers just to keep their heads above water as they struggle due to stagnant wages on an inflation adjusted basis since the early 1980s--that is if they have a job--and increasing expenses on essential items. Rising food prices, escalating tuition, escalating medical costs...you name it, are drowning hard-working Americans in debt.  

"In 2010, 28 percent of participants reported having an outstanding loan against their retirement accounts, an all-time high, according to a survey of 110 large employers by Aon Hewitt, a human resources consultancy. And nearly 7 percent of employees took hardship withdrawals that year — roughly a 40 percent increase since the recession, while 42 percent of workers cashed out their plans rather than rolling them over when they changed jobs.
Here are some of the best comments from the Washington Post article... because the comments are much more truthful than the article (if you want to read comments for yourself just click here and sort comments by "most liked").

Sean2020 wrote:
"This article misses the mark in a major way. For example, the author says there are efforts underway to cut Social Security benefits as a means of reducing the deficit, but Social Security doesn't add to the deficit. He also suggests employers are overpaying employees with regard to retirement benefits, but employers significantly cut overall employee compensation when they switched from DB to DC plans. Many employees didn't figure out that their overall compensation had been cut (still haven't!), because their salaries weren't reduced, and they thought DC plans would offer similar benefits to DB plans - they don't. I do agree with the author about the importance of establishing an emergency fund, but the real problem is that with wages stagnant on an inflation adjusted basis since the early 1980s, many workers have little to no money to save after paying essential expenses. The bottom line is that DCs should be used as they were originally intended - as a supplement to a pension, not as the primary vehicle for retirement income. To be blunt, they benefit Wall Street much more than Main Street. Research has shown DB plans, which enjoy professional management, lower costs, and economies of scale, do a much better job of managing money and providing benefits. The average worker needs a pension in retirement - no ifs, ands, or buts about it. The only way they're going to get them is to form unions to pry the money loose from executive salaries and perks, which have grown exponentially since the early 80s. There's collective bargaining or individual begging. Oh, by the way, conservative trolls on this blog have suggested this is all Obama's fault. Get real. For starters, try reading "Retirement Heist," by Ellen Schultz, a former Wall Street Journal reporter.
ScottFromOz wrote:
"Workers are in debt up to their eyeballs, with mortgages underwater, savings are gone and now they're dipping into their 401K's to pay the bills. Meanwhile, businesses and the 1%ers are drowning in oceans of cash that they WON'T spend. They keep tightening the screws on wages and then wonder why demand falls.

ticked wrote:
"Second great depression brought to you by the war criminals and war profiteers and oil profiteers and enablers of the financial crooks= bush/cheney/rove/gramm/paulsen...et al......

Oil under clinton averaged $28.00 a barrel
Oil under bush went to a high of $147. and averaged around $100-110

In 1999, CEO pay averaged 30-40 times worker pay
Today CEO pay averages 343 times worker pay

When Clinton left office there was a surplus
When the crooks left office the debt was $10 TRILLION and the financial crooks tole over ten trillion

And still five plus years later and the financial crooks are still not regulated and toxic derivatives are not regulated and according to goldman suxs are 5-6 times what they were when the bubble burst in 2007....that's over $1.2 QUADZILLION or more money than in all the world....

Wake up Americans the colluding politicians and special interests are stealing more of your money every day.

Here are the sums of total compensation for the most recent fiscal year- 2011 according to S&P

Capital IQ based on as reported total executive compensation:

• JPMorgan Chase CEO James Dimon: $23.1 million
• Wells Fargo CEO John Stumpf: $19.8 million
• Goldman Sachs CEO Lloyd Blankfein: $16.2 million
• Citigroup CEO Vikram Pandit: $14.9 million
• Bank of America CEO Brian Moynihan: $8.1 million

JPMorgan Chase's Dimon clearly brings home the biggest haul, but it's also the largest U.S. bank, largely due to his leadership.

Time will tell if the national outrage over bank CEO pay will result in changes in how the compensation is structured.
ccs53 wrote:
"When I started working 40 years ago, my savings account paid 5% interest and had zero fees. What's a savings account paying today? Less than 0.5% and fees if the balance falls below a minimum. A 401(k) plan is only as good as the employer that (who? Citizens United) sponsors it makes it. The employer chooses the investment vehicles (for better or worse), chooses the match level (or zero match), employees get the gains and pay the losses (2008 anyone?) MINUS fees and loads on the investments (employee can't control). What's the "average" rate of return for the typical American employee’s 401k over the last two decades? I found quotes of 3.5%-6.5%. A lot less or only slighly more than my savings account earned 25+ years ago, and back then I didn't have to risk losing half of it when the stock market tanked like it did in 2008 and will do again in the future. So how good is your 401(k)? Without nationwide standards, a 401(k) is only as good as the employer makes it -- do you trust your employer with your retirement money?

KarenLS wrote:
"Retirement was "guaranteed" relative to the contract individuals had with the companies....whether they were union or non-union jobs. Some form of retirement was part of the compensation packages given to each worker. What we have found over the decades is that these contracts are meaningless in the eyes of the courts which is why these corporations have been able to go to court and get judges to toss them without input from the workers who were losing the benefits without any equivelent compensation. Just all that "money" wiped off the books. First such major corporation I read about was back in the mid-90's in fact. I'm not just talking about going from defined pension plans to so called investment plans (which can tank and it`s just considered oh well the risk of investing.....when we have no choice) but all terminating health insurance coverage that had been promised as part of the compensation packages.

The Government has been doing the same with the military workers. "Free health care for life" was caveated back in 1957 and they (DOD) have been marching forward over the decades to elimination of coverage for retirees. Latest and greatest is to restrict the "miiitary health care" management companies from negotiating with medical organizations outside XXX miles of military treatment facilities for the best (Prime) rates. That makes the retiree or dependent have to pay a higher co-share of the bills which are not at the lowest negotiate rates. Kind of like going out of your plan. Won't be the retirees option.

So breaking faith with employees is not unique to the civilian world or the gov`t. What I find unsettling is that we employees don`t seem to care or perhaps notice. We certainly don`t seem to call it out. All while, at least in the civilian world, the top tiers of manangement are walking away with tens of millions of dollars in benefits whether they do a good, bad or indifferent job. We are Sheeple folks."
Centsorsense wrote:
"First employers raided pensions to pay their bills, then The government raided the social security trust fund to pay its bills, now workers are raiding their savings to pay their bills . . .
I wonder where they got that idea?

Also since many employers pay employees less salary based on their retirement benefits, employees are being repeatedly ripped off.
They are paid less in order to have a pension or 401k. Then the company steals the pension money leaving the retiree high and dry. Then Congress tanks the market again and again so the 401k loses value, instead of gaining.
Then just to be especially nasty the retiree gets bilked on their social security benefits too.
Meanwhile the CEO that raided their pension gets a bonus, Congress gets a six figure salary and healthcare for life, and then the retiree is called one of the 47% who paid into the system.

The game is rigged, these guys are right to cash out their 40lk. Otherwise they will never see their money it will be wasted by politicians and executives. So at least by spending it now they get something for their work."

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