An increasing number of people are having to turn to their retirement accounts to scare up cash. Withdrawing from an IRA, whether its a Roth or 401(k) plan, incurs stiff penalties, but people will do it when they are desperate enough. Being able to retire securely is becoming far more difficult.
Nearly one-fifth of workers make early withdrawal
Some people, when in dire straights, turn to their retirement accounts as a source of emergency cash. Though withdrawing money from one’s IRA can be a lifesaver — or seem like one — at the time, it may not be. It carries a stiff penalty, but more people are resorting to withdrawing from retirement accounts, according to Bankrate. The Financial Security Index, an annual survey by Bankrate.com, found that about 19 percent of respondents dipped into their IRA accounts at some point in the last year. About 17 percent of the people in the survey who are employed full time reported dipping into their retirement account at some point in 2010. Early withdrawals indicate that the people who withdrew the money did not have much money put away in case of emergency.
Fewer people believe they will retire
Retirement is becoming a dream that not many people believe they will be able to realize, according to CNN. A survey by the American Institute of Certified Public Accountants revealed that nearly 40 percent of working people surveyed believed they would not be able to afford to retire. Almost 56 percent said that they couldn’t afford retirement savings because food and gas costs were too high, and 55 percent had no idea how much would be necessary to save to retire. As a result of less confidence in the ability to retire, the younger set in the workforce are more apt to stay with an employer who offers a top shelf pension plan, according to Daily Finance. A Towers Watson survey revealed that 43 percent of respondents believed it was a great reason to stay at a job, up from 28 percent in 2009.
Retirement security at all time low
A secure retirement is something many people place a premium on, now more than than ever. People are less confident that they will be able to retire, and the state of the Social Security Administration is part of that. Roth IRA and 401(k) plans depend on stock values, so every economic downturn ruins many people’s nest eggs. More people are becoming interested in defined benefit plans, which have become rarer in the past few decades. Defined benefits, what many people refer to as a “pension,” is a flat rate payment given to a retiree each month. A traditional retirement account, like a 401(k) account, is called “defined contributions,” meaning an employer makes contributions while an employee works for them.