Early Tap of 401(k) Replaces Homes as American Piggy Bank
According to Bloomberg, early withdrawals from 401(K) accounts is at a record high.
The Internal Revenue Service collected $5.7 billion in 2011 from penalties, meaning that Americans took out about $57 billion from retirement funds before they were supposed to.
The median size of a 401(k) is $24,400 as of March 31, with people older than 55 having $65,300, according to Fidelity Investments. Those funds can disappear quickly in retirement, and the early withdrawals indicate that the coming retirement crisis could be even more acute than expected.
So, sure, the recession is over and consumer spending is trending back up. Long term unemployment and loss of UI benefits really hasn't hurt the economy, has it? Except, of course, that people still have to live and will use whatever money they may still have to do so. And that game won't go on forever.
And the grand bargain to cut Social Security - sure, why not? Responsible people have built up their 401(k) accounts - tax deferred, no less - so they can be accountable for their own financial futures. Great deal! Except, they haven't, and when they have, many need to cash in early. A median IRA of $65,000 won't go very far.
I don't see anything good coming out of this.