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Digging into your 401k to make ends meet
Old 02-25-2008, 09:50 AM   #1
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Digging into your 401k to make ends meet

Recent article from CB: AP IMPACT: More Americans Tap Retirement Accounts to Make Ends Meet; Withdrawals Carry Risks | Markets | Market News | Canadian Business Online

My appologies if a similar article has already been posted

As home prices fall and banks tighten lending standards, more people are doing the same thing: raiding their retirement savings just to get by and spending their nest eggs to gas up SUVs, pay mortgages or put food on the table.
-snip-
"People who take out a loan or withdrawal are adding to a looming retirement crisis over the next 30 to 40 years," said Eric Levy, a partner at global consulting firm Mercer. "And what implications will that have (for) our economy?"
-snip-
Some of the nation's largest retirement plan administrators, such as Great-West Retirement Services and Fidelity Investments, are seeing double-digit spikes in hardship withdrawals and increases in loan requests, a sharp departure from levels that traditionally varied little.
-snip-
Theresa Perry, who manages benefits for the firm PinkSlip LLC in San Francisco Bay, said she's been surprised by the number of people using hardship withdrawals to make payments on so-called "piggyback" loans, which are home-equity loans wrapped with a first mortgage to allow borrowers to fully finance a home's value.

Spend, spend, spend! Times are not looking good for the typical American consumer
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Old 02-25-2008, 09:53 AM   #2
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A co-worker dug into her TSP for a loan, to repair her home after it sat in 10 feet of water for 2-3 weeks after Katrina.

I would no more borrow from my TSP under ordinary circumstances, than fly! But in her situation, I might have done the same thing.
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Old 02-25-2008, 10:05 AM   #3
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I was always amazed how casually people talked of borrowing from the TSP. Some were CSRS, so they would have a decent pension; but still...
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Old 02-25-2008, 11:14 AM   #4
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I also read somewhere that more and more 401k plans offer Debit Cards linked to 401k, so you have instant access instead of doing paperwork. The rules are the same as getting a loan.
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Old 02-25-2008, 01:35 PM   #5
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Quote:
Originally Posted by aida2003 View Post
I also read somewhere that more and more 401k plans offer Debit Cards linked to 401k, so you have instant access instead of doing paperwork. The rules are the same as getting a loan.
I don't know the legislative background, but this is something that needs to be regulated. If current laws allow these withdrawals, they should be amended.

Otherwise, it will be just like the home price boom and bust. These people will spend their retirements today, and we will support them tomorrow via high and higher taxes.

Ha
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Old 02-25-2008, 01:54 PM   #6
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Years ago I borrowed from my 401K to complete the purchase of a piece of investment real estate. My thinking was that both were investments, just different type assets. I think it worked out, but there's no way to know now which way would have provided the highest return. I normally wouldn't recommend the practice.
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Old 02-25-2008, 02:40 PM   #7
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Ya life is rough trying to make that BMW lease payment. Damn I feel really sorry for him. So what if he made terrible financial choices. Terrible what is happening in Amerika. Hell who am I to judge I bet he needed that BMW to keep up with the Jones.
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Old 02-25-2008, 06:49 PM   #8
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BMW lease and camera gear on credit? Please. This guy deserves everything he gets. I'm unable to muster up a tear...
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Old 02-25-2008, 07:07 PM   #9
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I've also seen reports of 401k debit cards out there. Here's an article that actually seems to be in favor of them. Yikes.

A 401(k) debit card?! It's not so bad - MSN Money
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Old 02-25-2008, 09:59 PM   #10
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It would have to be a matter of life or death for me to take money out of my retirement account.
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