The Daily Item, Sunbury, PA

Business

January 17, 2013

More Workers Raid Retirement Accounts to Pay Bills

(Continued)

WASHINGTON, D.C. —

But their success depends on workers consistently contributing to them and allowing the money to stay in place throughout their careers, allowing their investment returns to compound. Many workers — particularly some earning higher salaries — do just that. But many others, who have precious little savings elsewhere, tap their retirement money as a sort of "rainy day" fund, eroding its power for the future.

Generally, workers are allowed to tap their retirement accounts for loans up to $50,000, or half their account's value, whichever is smaller. They also can "cash out" the money when they change jobs or they can take "hardship" withdrawals, which often go to pay for housing, overdue bills or educational expenses. The cashouts and hardship withdrawals subject account holders to taxes on the money they put into the accounts, any investment gains, and if they are under 591/2 years old, a 10 percent tax penalty.

Retirement experts warn that when workers draw on their retirement accounts to pay current bills, they put themselves at greater risk of descending into poverty upon retirement, which would leave them dependent on government programs such as subsidized housing or food stamps. Nearly 6 million senior citizens were living in or near poverty in 2010, according to a Senate committee, a number expected to increase sharply over the coming decade after a long period of decline.

HelloWallet's report found that lower-income people, who are the most frequent users of payday loans, pawnshops and other high-cost credit outlets, were found to be those most likely to cash out their retirement plans when they changed jobs.

Using data from the Federal Reserve's Survey of Consumer Finances as well as the Internal Revenue Service's Survey of Income and Program Participation, the report said 30 percent of households earning less than $50,000 a year had cashed out a retirement plan for non-retirement purposes. Only 12 percent of households earning between $100,000 and $150,000 a year and 8 percent of those earning more than $150,000 a year have cashed out a retirement account, the report said.

Text Only
Business
  • Fancy management systems won’t fix bad managers

    In violation of my long-standing “only watch TV” rule, I read an article recently about how Zappos is adopting a management structure known as holacracy.

    July 30, 2014

  • Your Office Coach: Supervisor-employee boundaries must be honored

    QUESTION: Two weeks ago, my husband “Barry“ unexpectedly came home from work with a large flat-screen television. He explained that one of his employees gave it to him as repayment for a loan. I was shocked, because I had no idea that Barry was lending people money.

    July 29, 2014

  • Silly mistakes that sink job applicants

    Some employers won’t care - or won’t catch them - but mistakes in word usage can put your application in the reject pile.

    July 29, 2014

  • Watercooler: Raised to the roof

    Q: Over 15 years, I have worked my way up the corporate ladder with the same organization. I have been given a raise every year and excellent reviews, as well as several promotions.

    July 25, 2014

  • Career Coach Q&A: job search follow-up; introverts as leaders

    Starting a business:

    Q: I have a stable job that I don't hate, but I have an idea for starting my own business.

    July 25, 2014

  • How to become a leader

    QUESTION: I’ve just been promoted into a leadership role. I’m excited, but also kind of overwhelmed. What do I need to do to be good at my new job?

    July 24, 2014

  • Balancing Act: How much is your time worth? Consider outsourcing some tasks

    Todd Paton has a booming business getting customers noticed on the Web. One tool he uses is generating online press releases to build brand awareness and create links that will send traffic to a customer’s website. But Paton, owner of Paton Internet Marketing, acknowledges that writing the releases is not his strong suit. Rather than spend his time doing it, he hires out the task.

    July 23, 2014

  • The Color of Money: No easy way to get out of debt

    Many people who are deeply in debt are desperate for a quick fix. They ask the question: What can I do to get out of debt?

    July 21, 2014

  • Watercooler: When to speak up if you see problems down the line

    Q: Our organization has hired a new director. I am one of a number of division heads; above us, there's the associate director, and above him is the director. The associate director is feared and disliked for his duplicity and dictatorial nature, though few have come forward because of his vindictiveness.

    July 18, 2014

  • Career Coach: Bringing a purpose-driven spirit to work

    Increasingly, religious beliefs and practices of employees are becoming more evident in the workplace. Religious diversity and concepts of spirituality are more prevalent in organizational settings.

    July 18, 2014

Business Video
Stocks