401(k) withdrawals hit 10-year high, says Fidelity

[Liberal_in_LA]

401(k) withdrawals hit 10-year high, says Fidelity
By Aaron Smith, CNNMoney.com staff writerAugust 20, 2010: 1:17 PM ET

NEW YORK (CNNMoney.com) -- Withdrawals from 401(k) retirement saving plans saw their biggest spike in over ten years, Fidelity Investments said on Friday, in the latest sign of a dismal economy.

Fidelity reported that 62,000 Fidelity participants made hardship withdrawals from their 401(k) workplace plans during the second quarter. That's up from 45,000 participants during the prior quarter, a 37% increase. That means that 2.2% of Fidelity customers took a hardship withdrawal in the second quarter, compared to 2% in the same period last year.

Fidelity also said that 11% of participants took out loans from their 401(k) over the past 12 months, an increase of two percentage points from the prior year. The average loan amount was $8,650 at the end of the second quarter.

The top reasons people took loans and made withdrawals were to prevent foreclosure or eviction, pay for college, or purchase a home, according to the firm.

"The current economy has forced some workers to borrow from their 401(k) accounts in order to pay for critical living expenses, ultimately jeopardizing their future retirement," said James MacDonald, president of workplace investing for Fidelity Investments.

http://money.cnn.com/2010/08/20/news/economy/fidelity_401k_withdrawal/index.htm?hpt=T2

[Renew Deal]

1. That's really bad news

:scared:

[Turbineguy]

2. Maybe the return on investment

helped them to decide too. The value of an education does not generally drop 20 percent in one month.

[Davis_X_Machina]

3. It's balance-sheet cleaning-up...

...if it's parents taking the withdrawals to pay for a child's college as opposed to doing a HELP loan. You have to pay taxes and penalty, of course, but you can also take tax credits when you file in the spring, clawing some of those back. Most importantly, you're not incurring further debt in a time of uncertainty.