Drawing money from retirement savings has become more common according to a new national survey. The study found that 19 percent of Americans admitted to tapping their retirement funds over the past 12 months to cover emergencies.
Americans Feel Less Secure about Finances
Personal debt is mounting for many Americans as they continue to cope with the after-effects of the recession. As a result, they are taking steps to cover their expenses, including taking money from retirement savings accounts like 401(k) and IRA plans.
The study, conducted by Princeton Survey Research Associates International, revealed that:
- 33 percent of Americans say their overall financial situation is worse than 12 months ago.
- Americans’ feelings of financial security have dropped to 93.5, down from 97.0 in March, as measured by the Financial Security Index.
- In April, 18 percent of Americans said they felt more comfortable with their debt, as compared with 24 percent in March and 26 percent in February.
In addition, the study found that 7 percent of Americans say they have no retirement savings at all.
Pulling from Retirement Savings Could Have Long-Term Repercussions
As shown in the study, it’s no secret that many people feel compelled to pull from their retirement savings in times of an emergency. However, it is rarely worth it.
Depending on your circumstance, taking out a loan or obtaining a hardship distribution could allow you to waive penalties. But even under those circumstances, experts usually advise you don’t borrow against your retirement savings and instead look for other funding sources.
If you are in need of money and think tapping your retirement savings is the way to go, it’s good to know the advantages and disadvantages of doing so. This way, you don’t have to feel surprised by the outcome of the decision you make.
