Retirement Blunder--Raiding the 401k

[Mountain_Mike]

Retirement blunder: Raiding the 401(k)

Survey: many workers cash out plans when changing jobs, incurring penalties and losing savings.

July 25, 2005: 11:16 AM EDT

By David Ellis, CNN/Money staff writer

NEW YORK (CNN/Money) - Almost half of workers leaving their jobs are raiding their 401(k) accounts for cash when changing jobs instead of holding on to their retirement savings, according to a recent study.

The survey, conducted by Hewitt Associates, a global human resources services firm, revealed that 45 percent of 200,000 individuals participating in 401(k) plans, opted to cash out of the retirement plan after leaving their job. "Our findings show that too many workers are not looking at their 401(k) savings as long-term in nature, but are instead using termination of employment as an opportunity to spend this money," said Lori Lucas, director of participant research at Hewitt Associates, said in a statement.

More…

http://money.cnn.com/2005/07/25/retirement/401k_survey/index.htm

 

[SteveR]

This should not be a big suprise to anyone. Many people just don't understand that thy are going to have a really hard time living in retirement without money. SS is not going to allow you to live and do what you want unless you enjoy living in a cardboard box and dumpster diving for dinner. With so many companies no longer doing defined benefit plans anymore 9or never did) that leaves 401(k) type plans or individual IRAs for long term tax deferred investing.

These folks will be working way into their 60s. That will actually help keep SS solvent that much longer. Let them work, I will be goofing off and enjoying Golden Years without having to work until I drop at my desk or only get a few months or years in retirement before I hit the end of the road.

Save now.....live in comfort later.

 

[maddythebeagle]

When I left my first job (age 25 or 26), I had an older employee tell me to take the money rather than rollover. I didnt listen to him.

 

[Olav23]

This should not be a big suprise to anyone. Many people just don't understand that thy are going to have a really hard time living in retirement without money. SS is not going to allow you to live and do what you want unless you enjoy living in a cardboard box and dumpster diving for dinner. With so many companies no longer doing defined benefit plans anymore 9or never did) that leaves 401(k) type plans or individual IRAs for long term tax deferred investing.

These folks will be working way into their 60s. That will actually help keep SS solvent that much longer. Let them work, I will be goofing off and enjoying Golden Years without having to work until I drop at my desk or only get a few months or years in retirement before I hit the end of the road.

Save now.....live in comfort later.

Even worse, I have been hearing about defined benefit plans defaulting on obligations! Man how great would that be. Being told you get a live-able salary until you die, so putting NOTHING away only to find out that the company has defaulted and you're now 75 years old and medical expenses mounting....

But don't worry. The gov will just make tighter restrictions on bankruptcy so you get to enjoy the rest of your days in a terrific hospital and leave the medical debt to your kids and grandkids!

God bless America! Sorry, on a bit of a rant today...

 

[maddythebeagle]

You still get a pension since these companies had to pay insurance premiums to the federal government (not 100% but something), but I am not sure a pension is enough for most people anyway and they have to add other savings to the mix.

 

[Mountain_Mike]

I wonder what most people must be thinking to pull out what little has built up in their 401k. Why don't they at least just let it ride...sheesh! Are they really counting on SS to save them?

Personally, I'm planning as if SS will NOT being there, and if I get anything from that system, it will be pure "gravy."