Americans Are Raiding Retirement Accounts
The Federal Reserve has unleashed record amounts of liquidity into the financial system, but as many people know all too well, very little is making its way to Main Street. Amid stagnant wages and rising expenses, more Americans are raiding their retirement accounts.
A recent analysis by Wells Fargo found that a high number of workers are now turning to their 401k plans as a source of lending. The bank reported that in the fourth quarter of 2012, the number of people taking loans out from their 401ks surged 28 percent from a year earlier. Furthermore, the average new loan balance jumped 7 percent from $6,662 to $7,126 in the same period.
While the perception may be that younger generations are careless with spending and retirement planning, older workers were most likely to tap their 401k plans. Of the participants who took out loans, 34.2 percent were people in their 50s, which is the greatest percentage of any age group in the study. People in their 60s and 40s came in at 28.9 percent and 27.3 percent, respectively. In fact, the increase among those in their 50s was almost double the increase among those under 30 years old.
“The increased loan activity particularly among older participants is concerning because those are the years when workers can start to make catch-up contributions and really need to focus on preparing for retirement,” said Laurie Nordquist, director of Wells Fargo Retirement, in a press release. “However, we know that this age is also the sandwich generation, caught between paying for their kids education and supporting elderly parents, which makes saving for retirement even more challenging.”
One in five people have 401k loans…