401(k) Investors: 21% Have Taken Early Withdrawals
The majority of U.S. workers say their employer offers a 401(k) plan. Of those people, 89% said they actually partake in the plan and 21% said they have either taken a loan or early withdrawal from their plan within the last 5 years, according to a recent Wells Fargo/Gallup study.
The survey also found that most 401(k) participants are happy with their plan, but Gallup found it “troubling” that a substantial number of people are using their plan differently than what the plans were intended.
What’s worse is that among the 1,009 U.S. adults (having $10,000 or more in investable assets) surveyed, most people are not aware of the consequences of taking an early withdrawal and the potential to cause long-term financial damage by doing so.
In fact, 55% said they understand the tax penalties of taking an early withdrawal “extremely well,” 40% said they understand the penalties “somewhat well,” and 5% said “not very well” or “not at all.”
So what can you do to make sure you’re making the right financial decisions? The study said it best: “At a time when the U.S. savings rate is on the lower side of the historical range, investors with the capacity to save may need more guidance about how to save to avoid costly emergency measures, or having to take out loans or engage in early withdrawals.”
For more information about the/Gallup “Investment and Retirement Optimism Index,” click here!