Thousands make 401 (k) hardship withdrawals
Disturbing news this morning: A record number of workers made hardship withdrawals from their retirement accounts in the second quarter, according to this Associated Press article.
Under hardship rules, people are sacrificing their retirement savings funds to meet more immediate needs like college tuition, medical expenses, costs relating to the purchase of a primary home, money for payments to prevent eviction or foreclosure, burial and funeral expenses and for repairs for damage to primary homes.
Fidelity reported that about 62,000 initiated a hardship withdrawal in the second quarter, the AP said. That’s up from 45,000 in the same period a year ago, with the average worker initiating a hardship between the ages of 35-55. Additionally, some people have applied twice — paying a 10 percent penalty on their retirement fund as well as taxes.
Question: Have you made a hardship withdrawal? What were the circumstances? Is your 401(k) money considered funds you would never touch?
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27 comments Add your comment
Barb
August 20th, 2010
1:56 pm
I waited to touch my 401k until I had been unemployed for 18 months and the bill for UI wasn’t passing through Congress. Pulled out all of the money and paid the senseless penalty.
former Clayton resident
August 20th, 2010
8:17 pm
After my husband lost his job and after he withdrew all of his 401k money I took a hardship withdrawal to catch up on bills & leave our home to move into an apartment. Clayton has its problems as everyone knows, but we loved our house and it hurt to have to leave it under these circumstances. If my hubby doesn’t find work before 2011 I’ll have to take another one especially if repuglicans take over the house & senate in November and stop unemployment extensions after November, which I’m sure they will since they didn’t want to give it up as it is. Yeah I know they’re trying to keep the deficit down but that’s not helping our family, who have never accepted any type of government handout and always worked to pay the bills.
Matt
August 20th, 2010
9:09 pm
Mrs Former Clayton, what do you think the unemployment benefit you get are? Wouldn’t that be a handout???
A guy that works on 401ks for a living
August 21st, 2010
12:04 am
That “senseless” penalty is there to discourage people from treating their 401k like a bank. It’s not a bank, it’s a retirement plan. I’ve personally heard people rage about “ITS MY MONEY WHY WONT YOU LET ME HAVE IT” and so on and so forth, but come on folks. If you want to be able to get to your money any time you want, stop contributing to your retirement plans and put that extra money in the bank. You want the employer match, you want the pre-tax benefit, but you don’t want to abide by the rules to get it. As far as hardship withdrawals go, I can tell you that the rather large client I work for has had an enormous uptick in Hardship Withdrawals in the past year. We have people sending them in for all kinds of things, including a ton of BS reasons with no documentation which get denied immediately. God how I wish people would actually READ their plan descriptions they give you when you ENROLL in your 401k so they would actually know how one works, instead of burning up the phones and screaming at us.
Rich
August 21st, 2010
12:18 am
former Clayton resident -Your hubby might be able to find a job if the “repuglicans” take over the house and senate. The current house and senate has not help him find a job.
jcwhitingjr
August 21st, 2010
12:50 am
In times like these when people are being laid off and taking a year or more to find employment again retirement money should be accessable penalty free. Let’s face it, most people don’t want to be unemployed and shouldn’t be punished because the companies they used to work for didn’t think they were making enough of a profit.
Been there, done that
August 21st, 2010
1:13 am
I’m an ultra-conservative laid off at the beginning of this recession; through no fault of my own. This recession was a result of bad policy decisions by both parties; including housing which suddenly collapsed, and energy which doubled almost overnight exacerbating the problem. My industry was already struggling before, and now at my age, my future prospects look bleak. UI isn’t charity; employees pay into it. I’m currently debt free despite long-term unemployment, but had to chose between remaining debt free and my 401K of 20K (it was an easy choice). A lot of people are really hurting through NO FAULT of their own; don’t judge until you’ve walked in their shoes. Don’t forget to VOTE this November!
Auction Foreclosure Property » 401(k) loans hit 10-year high in second quarter - San Francisco Chronicle
August 21st, 2010
2:25 am
[...] to prevent foreclosure or eviction, according to Boston asset manager Fidelity Investments. …Thousands make 401 (k) hardship withdrawalsAtlanta Journal Constitution (blog)More on LI tapping 401(k) nest eggs, experts sayNewsday [...]
S
August 21st, 2010
3:40 am
Lets face it both parties are at fault. The faults started with Reagan, with spending to much on the War Machine. Phil Graham a republican, drew up the bill to do away with Glass steagall, and Clinton signed it. Then we had good old George W. who started a War unnecessarily and has cost the people of this country more than they know. GW created ZERO net domestic jobs in all of his 8 years in office. He did create some jobs however, yep you know those jobs that left our shores,. Almost the whole time he was in office the economy was actually running on air, his air…after 9/11 what did he tell people to do, Go Shop, yes, shopping was his idea of fixing a country that was slowly falling, not for the Rich, nope they were getting fatter and fatter..the middle class was out there working their hearts out and yep spending, isn’t that what GW said to do…
Waiting for the Election
August 21st, 2010
3:48 am
Former Clayton resident remarks are very telling of the times we live in. She appears more concerned that Democrats say in power so her husband can continue to receive unemployment checks instead of Republicans, so her husband can get back to work. Is it any wonder we are in the shape we’re in.
Ole Guy
August 21st, 2010
7:26 am
I realize these times of economic strife pose problems of varying magnitude for many; this is probably one of the many financial decisions which certainly should not be entertained without first exhausting ALL other potential avenues. This particular course of action may be viewed as the most expeditious at the time. While other potential efforts may involve “more hastle”, 401k withdrawl MUST be viewed as an absolutely last-ditch course of action, particularly if the 401k is of the Roth variety.
Good luck to all; Godspeed.
Steve
August 21st, 2010
8:28 am
Former Clayton Resident and many others wrongly state that Republicans oppose extending unemployment benefits. The fact is that Republicans would like to extend the benefits, but they want the cost of the extension to be proviced for in the budget. Democrats want to add the cost to the deficit. That is the argument. Both parties favor extending benefits, but only one party want to pay for it, that is the Republican Party.
bcinbuford
August 21st, 2010
8:33 am
Yeah I have had to make a hardship withdrawal on my 401(k). First was to bury my father-in-law and mother-in law. The second was to keep my house when my wife was out of work for over half a year. I paid the penalties and still don’t like it. But the one thing people seem to forget is, with the way 401(k)’s are losing money, might as well use it while you got it. Also what difference will it make to take an early withdrawal penalty versus having to pay taxes on it if the “dum-ol-crats” have their way. The middle class is the backbone of the nation, not the brain. But I can’t help wondering if the brain isn’t trying to break its own back sometimes.
Ejmcga
August 21st, 2010
8:37 am
1st off, unemployment is not an entitlement nor a handout. It is insurance paid for by the employer and employee.
2nd, penalties on hardship withdrawals are just plain opportunistic. It’s similar to the super high interest rates charged by payday and title lain companies. It’s penalizing those who can least afford to pay it. I understand people shouldn’t tap their retirement funds except as a last resort, but why should the govt. Benefit from other peoples misfortune?
R
August 21st, 2010
8:39 am
Obama and the Democrats are not going to discourage cashing in 401Ks for hardship. This is just another indirect way that will force many to be dependent on the government during retirement or force you to keep working for more income taxes. Getting Democrats out of office will certainly help start a road to recovery. The powers that be and companies with money are just waiting for a change in power, they have to have confidence. Face facts, Obama is more concerned about turning us into a socialist country than he is about the economy. The money will start to flow when there is a change in power come November and in 2012 when Obama is no longer in office.
I do agree that we should stick with the penalties on withdrawls from 401Ks. Those agreements have to stick, and we have to start holding people accountable. Rules are there for a reason, if not our nation will continue to unravel.
Sick and Tired
August 21st, 2010
12:28 pm
R how do you think we got into this mess. It was not Obama but that stupid A Bush and his crew. Funny how he and Cheney is not suffering. The Republicans did not do any better than the administration in now.
R
August 21st, 2010
1:20 pm
“R how do you think we got into this mess.” — well it all started with Clinton’ NAFTA (jobs going overseas) and with Clinton’s Community Reinvestment Act (anyone with a pulse can have a mortgage).
“It was not Obama but that stupid A Bush and his crew.” — who is A Bush?
“Funny how he and Cheney is not suffering.” No, they both probably have excellent money mangement skills. Obama is not suffering either, sending his wife & daughter to Spain on the tax payer’s dime all while you are “sick and tired”.
“The Republicans did not do any better than the administration in now.” — true, Bush did not undo most of Clinton’s mess. Obama has not done a thing either, except place our country further in debt and create ObamaCare (which practically no one wants). This Obama administration is doing absolutely NOTHING to help this economy. When Obama becomes jobless in 2012, that is when our country will start turning around.
Maretta
August 21st, 2010
9:02 pm
This is the mess Bush and the republicans got us into, and it’s tough to get out. The republicans have done nothing but get us into messes.
Bob LeBlah
August 22nd, 2010
9:10 am
Wow.. its amazing how many people think govt is supposed to maintain your lifestyle for you. I feel very sad for some of you.. It must be a scary life for you to rely on government your whole life.
Hope
August 22nd, 2010
11:23 am
to the people who lose there jobs because of the economy, do what you have to do to make it until you find something else, if you need gov asst. or have to go into your 401k do it. Everybody situation is different and no one has a right to judge you.
former Clayton resident
August 22nd, 2010
12:07 pm
Hey Matt. My husband worked ALL of his life just like many other Americans so no I do not consider unemployment benefits a handout. You sound like one of those smug republcans who won’t “get it” until it happens to you, and I still don’t wish it on you.
former Clayton resident
August 22nd, 2010
12:16 pm
to Waiting for the Election, yeah I am waiting for the election and at this point although I’d prefer democrat I don’t care who is in power as long as the economy gets back on its feet and not only my husband but anybody who wants to work can get a job. My family has always worked hard, paid our taxes and never been on the government dole for any reason. but to be honest I don’t see things getting any better for the middle class (where my family is struggling to stay) under the republicans. I believe they could hire (or at least not lay off) more Americans but want to continue making President Obama look bad. I’m sure when a republican gets elected the employment floodgates will open and you guys will look like the messiahs you claim Obama is.
More republican lies
August 22nd, 2010
12:20 pm
Obama is not suffering either, sending his wife & daughter to Spain on the tax payer’s dime all while you are “sick and tired”.
The only thing the taxpayers paid for re: their vacation is secret service, which taxpayers pay for no matter where they go for the rest of their lives. Stop the lies.
joe
August 22nd, 2010
12:34 pm
The brainless wonder from Clayton, really needs too understand
the current state of affairs! The Repubs, as she attempts to write
are going for something called alittle fiscal responsibility, if we continue on this path of entitlement mentality, and continue with unemployment indefinitly, there won’t be any money, and then we will all be screwed! Wiseup-
Fed up
August 22nd, 2010
6:35 pm
Ejmcga — Yes, unemployment is “insurance” … but how many insurance policies are allowed to change terms in the middle of a crisis? There are terms and conditions that we agreed to, and “the taxpayer gets shafted” by extensions wasn’t one of them.
Shane
August 23rd, 2010
1:39 pm
I’m pretty tired of hearing the phrase “Through no fault of my own” when someone’s talking about losing their home or job, or, well, anything really. People need to start taking responsibility for themselves and quit making excuses. Yeah, unemployment’s high – do you know why unemployment’s high? Because the world has changed and YOU didn’t change with it – and that IS your fault – every restaurant I’ve been to in the past 4 months has NOW HIRING signs up – go get a job you freakin slackers and quit expecting to be an executive your entire life. I’m gonna slap the next douchebag who uses the phrase “thru no fault of my own”
Ole Guy
August 25th, 2010
10:57 am
Right on, Shane! Far too many people jumping on the bandwagon of faultless irresponsibility. People too often expect the entire economic picture to be the burden of others while they continue to enjoy life as if they were in complete isolation from reality. To these people, I say “LET EM DROWN”! They’ve seen reality, yet they refuse to accept responsible participation…”LET EM DROWN”!