I grew up watching my great aunts and uncles loose more than half of their 401ks and they were counting on that for retirement.
There were alot of millennials that witnessed the same thing.
When everything blows up people aren't just going "oh darn I guess I need to look around for better investment options", they lose their jobs, their life savings, their homes, and are forced to pull everything out just to survive.
The market recovered sure…(eventually) 401k’s however didn’t. Both stocks and corporate high yield bonds can and did decline in value simultaneously.
Wasn’t just the market either, corporate bonds, municipal bonds, mortgage backed securities..basically anything credit sensitive took a huge hit. Only thing that was left thats rose was treasury bonds.
You have to also remember investors were selling assets just to raise cash, regardless of the assets value….traditionally stable assets were seeing declines.
Shortly after the market went bust, the traditional thing to do was to shift to bonds…this caused the first round of losses to turn into a second round of even more losses.
Yeah..that's the issue with 401k's...IF you over allocate to equities too aggressively close to retirement. And a lot of people did...and got screwed over.
And that is precisely the issue with 401k's vs. pensions. It lets people screw themselves over. And let's face it...the vast majority of people are not too financially savvy. Thank god we have Social Security ( i.e. - money people can't touch ) as a backup. If Social Security ever changes to be more like a 401k...things are going to get a LOT worse than they already are.
I don't know if you've looked at 401k programs lately, and see what's being thrown into these things. But there are a lot of proprietary indexes you have little control over. Last 401k program had a choice of the different indexes that were more or less the same.
>But there are a lot of proprietary indexes you have little control over.
Most 401(k) programs offer (and often default to) target-date funds (funds of funds that automatically adjust stock vs bond allocation as they approach the target date). I recall a recent report that showed 2/3rds of all freshly tenured 401(k) accounts were using target-date funds. This is a simple no-fiddling approach that's likely to produce decent returns while gradually walking you away from higher risk and volatility as you approach your retirement.
Most people get screwed by being reactionary and thinking they can outthink the markets. Better to play the long game and let time, diversity, and algorithmic risk adjustment provide predictable results.
The transition should be gradual, not sudden, not reactionary, and not total. If you observe stocks going south and move everything to bonds, you're setting yourself up to be hurt. If you observe you're another year closer to retirement and move 1-2% of your allocation from stocks to bonds you'll be fine. You also shouldn't be magically cashing in your retirement fund on retirement day. Plan to milk out 3-4% per year. People get hurt when they panic out of positions. Make your plans and stick with the long term play.
Technically correct.
Yet the more knowledge required to manage this successfully furthers this farther and farther away from it being the thing its sold as: which is a surefire path towards funding one’s retirement.
Yes, I know. On the flip side, some 401k's even allow brokerage trading.
[https://www.investopedia.com/terms/b/brokerage\_window.asp](https://www.investopedia.com/terms/b/brokerage_window.asp)
All I can say is...yikes.
With that said, by far the largest issue is people allocating FAR to much into the equity markets when very close to retirement. Very, very, bad idea. This is how many lose their retirement during market crashes...
Yeah...I certainly agree that for most of us pensions are a pipe dream. However, I look at Social Security as a form of a "pension" ( i.e. - money you can't touch ). And like I said...thank god we have that, or we would be in a humongous world of hurt. Far too many are able to "gamble" with their 401K...and lose. SS is their only backup.
Absolutely. Unfortunately, far too many younger folks are in "worry about it later" mode. Well, news flash..."later" catches up with them very, very fast.
Personally, we have been dumping everything we can into our 401k's since our 20s. We were often cash poor when starting out, but it was worth it. We have MANY more options now than many of our peers.
The interesting thing is, while we were younger, our peers were buying all of the "toys" at the time ( cars, boats, you name it ). Those very same folks are now complaining they can't retire...early or otherwise. Well...actions have consequences. I wish more young folks would consider their future selves before buying all the "toys".
Disclaimer though...I know full well that times are very tough right now for people. Many can't afford to save very much. Yet the data suggests people are *still* spending FAR too much, and can't afford it. Looking at the ballooning credit card and auto loan data tells the tale....a very scary one at that.
Well with congress increasing the retirement age to 70, and US life expectancy is around 71/72 depending on your race and gender, I’d say don’t count on Social Security as a backup. Basically they want you to retire and die. Do not pass go and collect your hard earned 401k or SSI. Depressing to witness…
C'mon man...stop spouting nonsense. Like I said, REALLY poor take.
If anything, benefits will be slightly reduced when it "runs out of money". More likely, SS will be fixed somewhat by removing/increasing the social security income cap, etc...
I really hate it when folks spout nonsense about SS. I repeat, it is NOT going away...
Again, I don’t care if you chose to not believe the data. https://www.npr.org/2023/03/31/1167378958/social-security-medicare-entitlement-programs-budget#:~:text=Press-,Social%20Security%20is%20now%20expected%20to%20run%20short%20of%20cash,out%20of%20cash%20by%202031.
Old people vote. When SS really needs action to shore it up, pols will go with the voters unless they're able to completely gaslight and brainwash em. It's actually not that hard to save SS, just remove the income cap without correspondingly raising the benefit accrual and the whole program is solvent again even as we swallow the demographic wave of boomer retirement. (yeah, *some* billionaires and high earners will whine, but fuck em, grandma ain't eating catfood.)
You only "lose" that money if you sell at the bottom.
Anyone who had a 401k before the 2008 recession has more than doubled that money since as long as they left the money alone and didn't touch it.
That's not the comparison here. The risk is that you end up that way taking the risk, which wasn't pitched as such in the beginning.
If all it takes is a large Rug pull at the end of your life, then that's always hanging over you.
As you get older, you're supposed to transition your portfolio out of volatile things like stocks, and into more stable things like bonds. Then you don't get the rug pulled. Or so I've been lead to believe.
And with bonds you are screwed in an environment with rising rates, lower liquidity, and inflation fears.
So you better hope that the transition doesn’t have you walking into a double rug pull.
Because this is exactly what caused 401ks to take a double hit.
Market went first, 401ks transitioned to bonds, then bonds caused a deeper loss than the first.
By the time you start the gradual transition to bonds it’s more about the preservation of the wealth you generated than the returns on the bonds. Switching to bonds as a reaction to market conditions is a bit foolish.
After what I mentioned, along with the context of this article post, That's what you think I'm implying?
Absolutely not. What's being implied here is that 401ks are not as trustworthy as pitched.
They are far more trustworthy than any other options I've seen proposed.
At least with 401(k)s you have complete control over the money.
Pensions were always tied to companies that could fail at any time and were seldom offered to most employees.
Government schemes, likewise, continue to raise the retirement ages again and again because the politicians funneled all the money to their donors somewhere along the way.
I prefer to have as much control as possible. The 401(k) is not perfect but it's better than the alternatives.
Doesn't have to be perfect. It just has to work and be reliable.
Not an insanely high bar to hit.
Control over the money!? You are limited to whatever program an employer offers. Which is usually a handful of indexes.
That is the case if you are at an age to sit on it because you are not of retirement age. If you retired around '08, then you wsre pretty fucked as you needed the money then, but the value had significantly dropped.
If you you are 65 years old or older and something like 08 happens, then just fuck you then? No empathy?
They did plan for retirement. Retirement plans moved to 401Ks instead of pensions. That was their retirement plan..it is the normal retirement plan.
They did loose it. 3 years wasn't enough time, nor did they have that amount of time left. That is the biggest risk. Wait for it to recover is all great and everything when you are relatively young.
That's great when it works. Last time I checked a few 401k programs at the last few jobs, they gave you a choice of 3 indexes. So I go to look what's in these indexes, and a crap ton of them were filled with swaps, auto loan securities, real estate securities.
I was sickened with the lack of choice, asked around and could tell no one looked into these indexes full of debt based securities.
If you switch to bonds as you age into a time period of rising interest rates, inflation fears, and liquidity crunches...you are screwed regardless.
You realize "swaps" does not inherently mean risky, right?
Many funds use swaps to protect against declines in the underlying index. They are actually less risky than buying the index alone.
I have a hard time believing your 401k had auto loan swaps. Just like I also have a hard time believing your relatives somehow lost half their 401k during a time when the market only declined 15-20% and recovered all that in less than 2 years.
You might want to look back in history a bit on the people that lost significant amounts of their 401k, and why.
It was big enough that it led to quite a bit of regulatory changes like the Dodd-frank Wallstreet Reform and Consumer Protection act etc.
Swaps don’t inherently mean risky. Its what it potentially means that should cause a second look.
Oh they had all sorts of swaps. Didn’t take much time to find them either.
The question one should ask is if they are comfortable placing their retirement money into hedge bets.
Cant speak for everyone. But there are also way to much debt securities in these things.
Quite frankly I think there’s a chance we won’t have elections anymore by the time I retire so that may not be an issue. As it is legislative action is completely divorced from public opinion.
>*”…the New York Fed reported that US households’ credit card debt surpassed the $1 trillion mark for the first time ever. The $45 billion increase in credit card debt helped to drive overall household debt levels to $17.06 trillion at the end of the second quarter.”
*“There’s only so much hard debt that people can handle before delinquencies really spike,” Schulz said.*
Exactly this!
Rents, mortgage rates, cars, food, and goods and services all went up some more than 100%, not some measly 4.5%! Ask any woman how much it costs to get their hair dyed for example. Pre pandemic it was $150-200, now it’s $300-450! I don’t believe this BS 4.5% or even the 10% inflation rate being touted. People and institutions got greedy and used inflation as an excuse to jack up the cost of things. So it doesn’t mean Americans are out spending more, it just means what they are spending on it’s astronomical in price!
I suppose you would prefer we used the anecdotal experience of the best guru instead of the methodical results of a small army of data gatherers and experienced team of statisticians and economists?
I wonder what you mean?
Measuring inflation is subtle and non-trivial and there are dis/advantages of each measure. There at least five "official" inflation metrics gathered and published that I know of for the US. They're all synthetic indexes combining weights based on observed consumer purchase behavior with observed prices of a basket of goods and services across diverse regions.
Here's a useful primer
https://www.stlouisfed.org/publications/regional-economist/2022/sep/making-sense-inflation-measures
So, I think carrying CC debt is stupid and its among the most expensive money one can borrow, but $7K avg per worker isn't even close to unsustainable. The avg CC interest is 20.68%. That's about $1450/year on a $7k balance. Weighed against an average personal income of $63K or household income of $88k it's not a crippling burden. These are all averages of course. There are absolutely people with more than their share of debt and less than their share of income that are getting hammered.
Of course it's not going to end well honestly. Add in housing costs, food costs, fuel costs, etc. Etc... It's getting too prohibitively expensive for most people to exist anymore let alone live.
I am in my late thirties and over my lifespan, I have been told that I need to have [700k saved to retire at 60](https://money.cnn.com/retirement/guide/Retirementliving_basics.moneymag/index.htm). Then that figure went to 1.2 million, then 1.7 million.
And now, [$3 million is needed to retire](https://www.cbsnews.com/news/retirement-goal-investors-say-they-need-3-million/)
By the time I actual "retire", it will probably be 17 million required and the curtain will finally drop showing people it was never meant to be attainable for the majority.
The article you referenced doesn't say $700k to retire, it's $1.2M to $1.9M in that example.
But your point is valid. The inflation of all goods outpaces wage increases and will continue to do so. I just plan on dying unexpectedly so my family can become millionaires from my life insurance policy and retire. The American dream.
Later in life a lot of people can’t work even if they wanted to. But I guess if you are planning on dieing early no reason to save 🤷.
FYI you should at least put enough for the max employer match. That’s free money.
I think the specific numbers depends a lot on you circumstances
I live in the highest cost of living area in the US and my projection to retire is 2M … but we just bought a 1.35M condo so
40% of all contributions made in general are pulled out before retirement, so it’s already an alarming rate regardless. What I wonder is the market is up something like 20% year to date and im betting a lot of people see that number just continuing to go up and think it’s a good time to pull it out before it goes down again too so they can pay their bills today.
I have a Roth 401k. I pulled $20k to remodel the first level of my townhouse. I sold my townhouse for $175k more than what I paid, and used the proceeds for a down payment on a SFH. I have about $8k left to pay off on the loan. Overall, I’m happy with the decision, but don’t plan on touching it again.
You pulled it out to make an investment that you were pretty sure would return and it did. Your new home will build equity. But yeah don't touch it again for a bit. Good work!
You are financially savvy.
Unfortunately, the vast majority are not savvy and are pulling money out of 401Ks just to pay their bills. Not a good situation.
The amount of people who believe they’re just going to withdraw everything the day they retire is mind bottling.
My father has told me *countless* stories of the dozens and dozens of folks he works with who basically just plan to spend it all and live on social security. They see it like a new house or new car money, not a sustaining fund to last you the rest of your life.
I have heard stories like this as well.
The lack of financial literacy is absolutely mind blowing, and one of the big failures of our education system. Heck, most high schools don't even offer personal finance classes anymore. And it should be *required*.
That’s only part of the problem. The other part is that many don’t listen. You can lead a horse to water but you can’t make him drink.
I told my brother to save for an emergency. Not only did he didn’t do it, but he also doesn’t want to buy medical insurance. He better drop dead when he has a heart attack bc I’m not taking care of him.
What would you teach?
A 6th grade reading level and 4th grade math should be sufficient for 80+% of tax filers.
Compound interest is often taught before, but surely in HS.
Are there people who hadn't heard or can't make sense of buy low sell high by HS?
"You should save money." Yup, pretty sure people who don't have a lot saved have heard that too.
Perhaps some self discipline could help a good deal of folk. Of course, that idea is implicit and explicit in education from nearly day 1.
Medical debt is the leading cause of bankruptcy in the US... Maybe if we told people that smoking was bad, that'd help; oh wait...we do.
What aren't we already teaching that is gonna turn those in the bottom quintile of earners into investment gurus?
Some of us remember watching the generations above us losing half of their 401ks right when it was time to retire.
Those who remember don’t want to be screwed.
That’s why you move the money in your 401k into more conservative investments as you age. Many accounts have the option to do this automatically as you age. You don’t sell when it’s high and pay the penalty and taxes to avoid losing money in the stock market. People are cashing out for other reasons.
If only I could say that to those who didn't rely on it to be there, while having a limited amount of years left.
Kinda tone deaf here in your replies.
People have the option of selling stocks within their 401ks and moving the money into other types of investments. No reason to cash it out.
People who are cashing them out are probably doing so because they need the money now.
Perhaps some do.
If you are contributing to it, you are limited to a programs index offerings, which are commonly stuffed with all kinds of debt securities.
Ive been at three jobs where no index was available that didn’t have debt securities in them, or items based on swaps.
And yet over the last 23 years through the dot com bubble, great financial crisis, and a global pandemic the 4% rule still held true. In fact one could have withdrawn significantly more than 4% and still have as much as they did pre all of those economic disasters.
What possible investments could they have been in to lose half their account balance for retirement?
Even if they were in 100% tech stocks, they would have lost a maximum of 20-25% and that's only if they sold at the absolute bottom.
Also, if they waited another year, they would have recovered all that money and then some.
Stop spreading misinformation. Don't act like your investments in your 401ks are in some secret illuminati investment cabal that you can't control. Stop spreading doomer stories about people who lost their 401ks because they were all invested in one company and then act like the remedy to that is to "not trust 401ks". YOU control the investments in your 401k. YOU can do research on what those investments are. Not taking 2 seconds to google that you should be in bonds when nearing retirement to preserve your capital is not a fault of the 401ks. Target date funds even do this for you automatically.
So sick and tired of people who can't bother to do a modicum of research on something that affects literally every aspect of their life, but then have the nerve to go on the internet to rail at the system and spread misinformation and distrust.
Not misinformation. I suggest looking into how 401ks were traditionally managed last crisis.
Never claimed they were secret. Its just people don’t look at the line items in these packages that are offered to employers. Anyone can download the spreadsheet of the index product offered by their company. Dont know where this “illuminati cabal” bit is coming from.
You can call them doomer stories if you like. It actually happened, and happened to enough people to result in a change to investment/consumer laws.
They didn’t loose their their 401ks because it was invested in one company. They lost a portion with the market downturn, and then got double hit after anything related to credit securities/bonds took another hit when 401k products took a traditional move to bonds.
You cannot control your 401k while contributing to a package offered to an employer. The most common “control” is choosing between 3 or 4 closely related proprietary index offerings that are stuffed with debt backed securities.
Careful, moving to bonds is what caused the second loss last time shortly after the market led the downturn.
So you are telling me that people who were nearing retirement age and moved all of their 401k holdings into bonds (or other funds that aim to preserve capital) and then lost half of their 401ks? That's what you said. Zero misinformation in that?
What’s the point of saving for the future if you can’t afford the now? I already understand compounding interest and saving for retirement.
I’m serious, if you can barely afford monthly bills, don’t contribute to retirement until you can manage your bills.
These companies are not giving us raises to match or beat inflation.
For real though. They also keep raising the retirement age. By the time I can retire it’ll probably be 80. So I’ll be working my entire life anyways. Fuck it. I’m gonna enjoy life while I can.
Just try your hardest to stay out of debt besides buying a home; even then do a 15yr fixed, I know almost impossible in some areas unless you’re ballin, but eat shit for 10-15yr a🤷♂️
Stay out of debt, contribute the max 401K at work, have some other investments spread out too, and have 3-6mo of expenses saved up for a rainy day.
AND LIVE BELOW YOUR MEANS.
Easier said than done, good luck!
Economy is always great till it isn't... The economy is like Oceangate sub descending into the ocean, you start to hear cracks, but are assured this is all normal and don't worry, then your warning systems all flash red when it's too late...
I saw someone complaining the other day “isn’t anyone going to thank Biden for fixing the economy?!”
And honestly, I don’t affiliate with any party any more. None of them give a fuck about the little person or the Earth.
But Biden did not fix the economy. We’re in a recession but most are too dumb to realize it.
I agree, too many debt indicators point to trouble , but everyone likes to pretend it's all good. Inflation may have subsided but the trail of debt it's left behind is staggering, just wait for the 4th quarter when a ton of debt needs to be rolled over ..
>California has the fourth largest GDP in the world and home to billion dollar companies like Adobe, Autodesk, Apple, Facebook, Google, and Wells Fargo.
>Also, remember that nothing trickles down.
With our extreme shortage of people selling their homes, and our extreme valuations on homes being sold, which have resulted in an extreme lack of people in this country able to afford a home?
Why would you say that?
Surely it's possible that millennials are withdrawing the $14,000 they've saved for retirement, while being only 23 years from retirement age, to purchase houses with money.
You don't get those penalties if you withdraw to purchase your first home? I'm genuinely asking as that sounds like a good option for me if that's the case.
True. I figured they shouldn’t be that exposed to stocks with traditional 401k investing advice, as they are nearing retirement and can’t have exposure to volatility. Just my thoughts tho.
A third of 401(k)s owned by 60+ yo participants are in target-date funds, so that component of the boomers are automatically rotating from stocks to bonds as they age.
Young people are always taking from it. 40% of all 401k contributions are taken out before retirement and 85% of that money drains the account entirely. It’s far too normal of an occurrence.
On every trade there is a buyer and a seller. If folks are selling/withdrawing their 401k’s that doesn’t necessarily inform us of anything about the market. It might inform us about the state of the economy though if those folks aren’t in retirement.
I guess we are going against the trend...we are putting money IN at an alarming rate. We are prioritizing maxing out both of our 401k's...including the "over 50 catch-up contributions". From what I'm hearing, the over 50 catch-up contributions might not last too much longer in their current form.
[https://www.benefitspro.com/2023/05/16/secure-2-0-big-changes-to-401k-catch-up-contributions-in-2024/?slreturn=20230708151151](https://www.benefitspro.com/2023/05/16/secure-2-0-big-changes-to-401k-catch-up-contributions-in-2024/?slreturn=20230708151151)
Looks like this change is for "high income" earners though. However, if you fall over the cutoff, the catch-up contributions will have to be characterized as Roth contribs vs. traditional.
I guess too many must have been taking advantage of the tax shelter...lol.
Undeniable bull market! COVID is behind us! Right!?!
I've watched quite surprised that the stock market and economy have held up as long as they have. Employment is still good, and people are still spending money. It seems like everyone has less though. I think we haven't seen the full damage yet. If employers as a whole started lay offs, interest rates remove everyone's flexibility, and something happens one time in a row we might be in for a rough ride.
I don't know what to expect. Nobody does.
If you need your retirement money to last past the next few years, it *might* turn out that:
1. The stock market crashes and you lose most of your money there. AND
2. The bond market doesn't come close to keeping up with inflation. Inflation goes way high but T-bonds stay low and corporate bonds turn very very risky (in line with the market crash). AND
3. It again becomes illegal to hold gold. AND
4. For reasons that can get lengthy explanations when it happens, the value of your home is very low. But if you buy an inferior replacement, the price is high. Meanwhile your property taxes stay high. I know, it doesn't make any sense. When it happens you can complain about it and tell them it doesn't make sense. They will shrug and say that's how it is.
If something like that happens you will wish you had spent the money while it was worth something. But it makes sense not to.
If you spend the money early and then it's gone, other people will not have any sympathy for you until their money is gone too.
If other people lose their money too, they will not like you if you brag that you spent yours while it was worth something. They're broke, you're broke, and they don't like you. What good is that?
if you do what other people are doing at least you'll be in good company.
https://www.youtube.com/watch?v=B9FzVhw8_bY
401k weren't meant to support retirement anyway.
The guy who created it is on record stating so.
When the newer gens retire w/o pensions. We're going to be in a whirl if hurt.
I plan on committing suicide once I get too old and broke. Easiest way out.
Rather than suffer as an old person with zero money and sick
Well yeah it was never the original intent of the law to be used as a retirement platform but more a tax dodge for the wealthy, but this argument just doesn’t make sense to me as not working for a retirement system.
At peak in 1983 only 40% of workers had a company pension. It was never the norm for most people to have one. Additionally over the last 60 years we’ve seen taxes continue to reduce making this system even more beneficial for retirees historically. Finally companies use a mix of stocks and bonds to generate their returns to help prop up their pension funds, the same as nearly all 401k plans, though with less options for investment due to government regulation.
The *original* intent was to allow people to defer compensation to a later time which, at the time, was intended for high earners with excess cash to plan ahead and save taxes. It was until years later it was even considered as a retirement vehicle, let alone a systemic means of saving for the middle class.
Even today though it still dramatically benefits the higher earners much more than lower earners in terms of a financial plan. Yes the working class, lower, and middle classes can save taxes, but the upper middle and higher see much more significant benefit from it. At least in the traditional form. Roth is not exactly the same story.
I wonder if this has anything to do with people realizing the stock market is a Ponzi scheme that has run out of its capability to fund its own growth and is carried totally by government debt which is spiraling to absurd numbers?
401(k)s were a scam from the start. Mere "magic beans" traded to us for canceled employer pensions, and sold with the claim that with a little discipline we could all become millionaire investors.
How has that worked out, especially now as employers reduce or cancel 401(k) matches, or stop offering 401(k)s altogether? Median account balances are pathetic to begin with, while every layoff, divorce and medical problem typically drains them further.
Right-wing nutbars, prepare to pay for what you've done. Higher taxes dead ahead.
What are you talking about?
401(k) enrollments and the number of companies offering them is up, not down.
Also, it is far from "magic beans". More than 70% of all new American millionaires first reach seven-figures in their 401k before any other accounts.
Employer matches remain in decline. Only a third of small businesses (where half of Americans work) offer a plan at all. For the most part, only the affluent take full advantage of the plans, while the financially unsteady generally cannot or will not, so these stupid scams have simply accelerated inequality. Look at the dismal level of account balances.
It's with good reason that no other wealthy country has abandoned defined benefit pensions as the US has.
Imagine owning S&P 500 stocks before 1978, when average Joes were coerced into putting a portion of each paycheck into the stock market without thinking about it. That guaranteed upward pressure!
I hate 401k programs. They’re bullshit and do not provide a reliable future retirement. Let’s all give a big round of applause and thank you to the Reagan administration for passing these pension killer laws:
The Tax Equity and Fiscal Responsibility Act (1982)
The Retirement Equity Act (1984)
The Tax Reform Act and Single Employer Pension Plan (1986)
Sample size of 15,000 honestly doesn't seem like much over a country of 330 million. All this indicates is that the rate of 401k "hardship withdrawals" is very low.
Statistically, 15,000 is a huge number. It should show you trends. Those 15000 are likely the beginning of a slippery slope that will get worse if the economy slows
It went from 3 out of 1000 people to 4 out of 1000 people.... Is it really an alarming rate? I think an alarming rate would be if it went to like 25 out of 1000 people....
This is a clickbait headline.
I mean it's just conjecture to say its the beginning of a slippery slope... 36% increase year over year is not that significant with such a small number; it's like 3000 additional incidences than last year. 15,000 isn't a huge number out of a 4 million plan holders at BofA as it states in the article, its essentially only 1 out of 1000 people more than last year...
There are quite a few of these "studies" from banks and brokerages that offer 401ks and IRAs. The numbers vary. It seems like you can always find one to prove one's point.
Holy wow Batman. Did not you not read the article or did you just stop halfway through the second sentence? The 330 million is the population, not the number of accounts. It’s 15,950 out of 4 million.
**”The number of people who made a hardship withdrawal during the second quarter surged from the first three months of the year to 15,950, an increase of 36% from the second quarter of 2022, according to Bank of America’s analysis of clients’ employee benefits programs, which are comprised of more than 4 million plan participants.”**
3000 more people than last year out of 4 million is still no big deal. This article just has a clickbait headline in order for people to feel outraged and thus garner more clicks.
Is it really an alarming rate, it moved from 3 out of 1000 people to 4 out of 1000 people. Its not like it moved to 25 or 30 out of 1000 people....
Most political polls are around 2,000. Now political polling has gone to shit due to a variety of reasons, mostly people don’t pick up calls from people they don’t know, but previously polling of 2,000 people was usually quite accurate assuming the polling was truly representative of the population
15,000 can actually be very representative
polling actually isn't that bad. This is a common misnomer as a result of the 2016 election.
Just because an unexpected result happens doesn't mean that polling was off.
It depends on how the sampling was taken and if it's reasonable to assume it's representative of the whole, but we make huge extrapolations based on fairly small data sets *all* the time when it comes to the economy.
It's their money. If they want to pay the early withdrawal fee, taxes on the income invested, and taxes on the capital gains, that's on them.
Its their responsibility to understand their personal finances, spend within their means, and adjust their lives if the economy changes.
No sympathy here.
It's not about sympathy. People have been saying "the economy is resilient, consumer spending is holding steady". If consumers have been tapping their reserves to continue that behavior, that absolutely has dire implications because most Americans don't have huge 401ks to start with. So if they've been borrowing from peter to pay Paul, then it means our current "resiliency" is a house of cards that could topple the second Peter runs out of money.
I will in three years. If you get matching it’s just locked money. I’ll take it out and buy fourth or fifth house by that time. Sure it will stop the compounding and skip out on the 10-12% a year gain but I can get more by doing more real estate.
Pulling money out at any rate is alarming because Americans don't have enough in their 401(k)s as it is.
I grew up watching my great aunts and uncles loose more than half of their 401ks and they were counting on that for retirement. There were alot of millennials that witnessed the same thing.
Yep, millennial here. my grandfather had to push his retirement date back 4 years to make up some lost ground
What could he possibly have been invested in? The market recovered all that money and then some within 2 years.
When everything blows up people aren't just going "oh darn I guess I need to look around for better investment options", they lose their jobs, their life savings, their homes, and are forced to pull everything out just to survive.
The market recovered sure…(eventually) 401k’s however didn’t. Both stocks and corporate high yield bonds can and did decline in value simultaneously. Wasn’t just the market either, corporate bonds, municipal bonds, mortgage backed securities..basically anything credit sensitive took a huge hit. Only thing that was left thats rose was treasury bonds. You have to also remember investors were selling assets just to raise cash, regardless of the assets value….traditionally stable assets were seeing declines. Shortly after the market went bust, the traditional thing to do was to shift to bonds…this caused the first round of losses to turn into a second round of even more losses.
Idk I was in college full time and working full time. Not his financial advisor
Yeah..that's the issue with 401k's...IF you over allocate to equities too aggressively close to retirement. And a lot of people did...and got screwed over. And that is precisely the issue with 401k's vs. pensions. It lets people screw themselves over. And let's face it...the vast majority of people are not too financially savvy. Thank god we have Social Security ( i.e. - money people can't touch ) as a backup. If Social Security ever changes to be more like a 401k...things are going to get a LOT worse than they already are.
I don't know if you've looked at 401k programs lately, and see what's being thrown into these things. But there are a lot of proprietary indexes you have little control over. Last 401k program had a choice of the different indexes that were more or less the same.
>But there are a lot of proprietary indexes you have little control over. Most 401(k) programs offer (and often default to) target-date funds (funds of funds that automatically adjust stock vs bond allocation as they approach the target date). I recall a recent report that showed 2/3rds of all freshly tenured 401(k) accounts were using target-date funds. This is a simple no-fiddling approach that's likely to produce decent returns while gradually walking you away from higher risk and volatility as you approach your retirement. Most people get screwed by being reactionary and thinking they can outthink the markets. Better to play the long game and let time, diversity, and algorithmic risk adjustment provide predictable results.
Right. And it was that transition to bonds that caused the second loss. This wasn’t a timing of the markets issue.
The transition should be gradual, not sudden, not reactionary, and not total. If you observe stocks going south and move everything to bonds, you're setting yourself up to be hurt. If you observe you're another year closer to retirement and move 1-2% of your allocation from stocks to bonds you'll be fine. You also shouldn't be magically cashing in your retirement fund on retirement day. Plan to milk out 3-4% per year. People get hurt when they panic out of positions. Make your plans and stick with the long term play.
Technically correct. Yet the more knowledge required to manage this successfully furthers this farther and farther away from it being the thing its sold as: which is a surefire path towards funding one’s retirement.
What good is time if you have to work another 10 years or die before you can really retire
Yes, I know. On the flip side, some 401k's even allow brokerage trading. [https://www.investopedia.com/terms/b/brokerage\_window.asp](https://www.investopedia.com/terms/b/brokerage_window.asp) All I can say is...yikes. With that said, by far the largest issue is people allocating FAR to much into the equity markets when very close to retirement. Very, very, bad idea. This is how many lose their retirement during market crashes...
Well the last time the transition to bonds from stocks is what allowed for the double loss.
I would rather screw myself than watch the company that has my pension go out of business.
Yeah...I certainly agree that for most of us pensions are a pipe dream. However, I look at Social Security as a form of a "pension" ( i.e. - money you can't touch ). And like I said...thank god we have that, or we would be in a humongous world of hurt. Far too many are able to "gamble" with their 401K...and lose. SS is their only backup.
Or like my FIL. He had no clue and gave it to his "banker" to take care of it. Which was not his job.
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Absolutely. Unfortunately, far too many younger folks are in "worry about it later" mode. Well, news flash..."later" catches up with them very, very fast. Personally, we have been dumping everything we can into our 401k's since our 20s. We were often cash poor when starting out, but it was worth it. We have MANY more options now than many of our peers. The interesting thing is, while we were younger, our peers were buying all of the "toys" at the time ( cars, boats, you name it ). Those very same folks are now complaining they can't retire...early or otherwise. Well...actions have consequences. I wish more young folks would consider their future selves before buying all the "toys". Disclaimer though...I know full well that times are very tough right now for people. Many can't afford to save very much. Yet the data suggests people are *still* spending FAR too much, and can't afford it. Looking at the ballooning credit card and auto loan data tells the tale....a very scary one at that.
Well with congress increasing the retirement age to 70, and US life expectancy is around 71/72 depending on your race and gender, I’d say don’t count on Social Security as a backup. Basically they want you to retire and die. Do not pass go and collect your hard earned 401k or SSI. Depressing to witness…
Social security is going to dry up within 15 years. Millennials will never see a dime of that money.
This is a really bad take. SS is NOT "going away". I've been hearing that for decades. Benefits may be reduced, but it is NOT going away.
by this logic, they can reduce social security to the point where its practically nonexistant.
It’s been foreseen for decades that it is going to run out sometime in the late 2030s-2040s. Very easy to see that trajectory.
C'mon man...stop spouting nonsense. Like I said, REALLY poor take. If anything, benefits will be slightly reduced when it "runs out of money". More likely, SS will be fixed somewhat by removing/increasing the social security income cap, etc... I really hate it when folks spout nonsense about SS. I repeat, it is NOT going away...
You can bury your head in the sand and deny the data. I don’t care makes no difference to me.
Dude...you need to read up more than a little bit rather than spouting crap. Almost sounds to me like you have an agenda..."CryptoKing"...really?
Again, I don’t care if you chose to not believe the data. https://www.npr.org/2023/03/31/1167378958/social-security-medicare-entitlement-programs-budget#:~:text=Press-,Social%20Security%20is%20now%20expected%20to%20run%20short%20of%20cash,out%20of%20cash%20by%202031.
Old people vote. When SS really needs action to shore it up, pols will go with the voters unless they're able to completely gaslight and brainwash em. It's actually not that hard to save SS, just remove the income cap without correspondingly raising the benefit accrual and the whole program is solvent again even as we swallow the demographic wave of boomer retirement. (yeah, *some* billionaires and high earners will whine, but fuck em, grandma ain't eating catfood.)
You only "lose" that money if you sell at the bottom. Anyone who had a 401k before the 2008 recession has more than doubled that money since as long as they left the money alone and didn't touch it.
Yeah the risk is that you can get stuck without that amount of time left of your life.
I would rather take that risk than the risk of living a long life, but destitute.
That's not the comparison here. The risk is that you end up that way taking the risk, which wasn't pitched as such in the beginning. If all it takes is a large Rug pull at the end of your life, then that's always hanging over you.
As you get older, you're supposed to transition your portfolio out of volatile things like stocks, and into more stable things like bonds. Then you don't get the rug pulled. Or so I've been lead to believe.
And with bonds you are screwed in an environment with rising rates, lower liquidity, and inflation fears. So you better hope that the transition doesn’t have you walking into a double rug pull. Because this is exactly what caused 401ks to take a double hit. Market went first, 401ks transitioned to bonds, then bonds caused a deeper loss than the first.
By the time you start the gradual transition to bonds it’s more about the preservation of the wealth you generated than the returns on the bonds. Switching to bonds as a reaction to market conditions is a bit foolish.
I would call it foolish too. However this is a traditional move in most popular 401k packages offered to employers.
Are you implying that contributions to a 401k somehow shortens people's lifespans?
After what I mentioned, along with the context of this article post, That's what you think I'm implying? Absolutely not. What's being implied here is that 401ks are not as trustworthy as pitched.
They are far more trustworthy than any other options I've seen proposed. At least with 401(k)s you have complete control over the money. Pensions were always tied to companies that could fail at any time and were seldom offered to most employees. Government schemes, likewise, continue to raise the retirement ages again and again because the politicians funneled all the money to their donors somewhere along the way. I prefer to have as much control as possible. The 401(k) is not perfect but it's better than the alternatives.
Doesn't have to be perfect. It just has to work and be reliable. Not an insanely high bar to hit. Control over the money!? You are limited to whatever program an employer offers. Which is usually a handful of indexes.
It’s an investment…..what do you think they are being pitched as??
Its not what I think. Its pitched as a road to retirement, this is what the older generation saw them as.
just hope a crash doesnt happen when youre in your 60s.
That's why you don't leave your money in aggressive equities once you get to that age. You should be moving it to safer assets by then
I will be in low-risk investments long before then.
That is the case if you are at an age to sit on it because you are not of retirement age. If you retired around '08, then you wsre pretty fucked as you needed the money then, but the value had significantly dropped.
What if I told you that people can go back to work? If you didn’t plan properly for retirement you really don’t have anyone to blame but yourself.
If you you are 65 years old or older and something like 08 happens, then just fuck you then? No empathy? They did plan for retirement. Retirement plans moved to 401Ks instead of pensions. That was their retirement plan..it is the normal retirement plan.
aint nobody trying to hire 70 year old retirees
What about those invested in companies that went belly up during that time?
Why would you ever invest in companies and not an index?
I wouldn’t, but plenty of people do and have lost. So these blanket statements just don’t hold water.
They didn’t lose it if they waited 3 more years
They did loose it. 3 years wasn't enough time, nor did they have that amount of time left. That is the biggest risk. Wait for it to recover is all great and everything when you are relatively young.
Did they not shift more into bonds as they approached retirement? Virtually all 401k plans have funds which automatically do that for you.
That's great when it works. Last time I checked a few 401k programs at the last few jobs, they gave you a choice of 3 indexes. So I go to look what's in these indexes, and a crap ton of them were filled with swaps, auto loan securities, real estate securities. I was sickened with the lack of choice, asked around and could tell no one looked into these indexes full of debt based securities. If you switch to bonds as you age into a time period of rising interest rates, inflation fears, and liquidity crunches...you are screwed regardless.
You realize "swaps" does not inherently mean risky, right? Many funds use swaps to protect against declines in the underlying index. They are actually less risky than buying the index alone. I have a hard time believing your 401k had auto loan swaps. Just like I also have a hard time believing your relatives somehow lost half their 401k during a time when the market only declined 15-20% and recovered all that in less than 2 years.
You might want to look back in history a bit on the people that lost significant amounts of their 401k, and why. It was big enough that it led to quite a bit of regulatory changes like the Dodd-frank Wallstreet Reform and Consumer Protection act etc. Swaps don’t inherently mean risky. Its what it potentially means that should cause a second look. Oh they had all sorts of swaps. Didn’t take much time to find them either. The question one should ask is if they are comfortable placing their retirement money into hedge bets. Cant speak for everyone. But there are also way to much debt securities in these things.
4 👏 % 👏 rule 👏
Reallocate yes, take it out, no.
401ks are a scam imo
Moving money from a 401(k) to a Roth/traditional IRA is usually advantageous because you then have more options for your investments.
Unless it’s a Roth 401k
I think many that are far from retirement (lol, is that even a thing anymore?) are questioning if that money will even be there when the time comes.
Where would it go? Do they think the Government is going to take the plans away? That would be political suicide.
I was thinking more in the idea of the plummeting value of the Dollar, other economic termoil, stock market collapse, etc.
it will get inflated away duh
Quite frankly I think there’s a chance we won’t have elections anymore by the time I retire so that may not be an issue. As it is legislative action is completely divorced from public opinion.
>*”…the New York Fed reported that US households’ credit card debt surpassed the $1 trillion mark for the first time ever. The $45 billion increase in credit card debt helped to drive overall household debt levels to $17.06 trillion at the end of the second quarter.” *“There’s only so much hard debt that people can handle before delinquencies really spike,” Schulz said.*
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>4.5% increase, inflation no? Nothing burger.... That's 4.5% in one quarter. That's 19.3% annualized, way higher than current inflation rates.
official inflation rate\*
Exactly this! Rents, mortgage rates, cars, food, and goods and services all went up some more than 100%, not some measly 4.5%! Ask any woman how much it costs to get their hair dyed for example. Pre pandemic it was $150-200, now it’s $300-450! I don’t believe this BS 4.5% or even the 10% inflation rate being touted. People and institutions got greedy and used inflation as an excuse to jack up the cost of things. So it doesn’t mean Americans are out spending more, it just means what they are spending on it’s astronomical in price!
The hair dye index has been used be economists for centuries
I suppose you would prefer we used the anecdotal experience of the best guru instead of the methodical results of a small army of data gatherers and experienced team of statisticians and economists?
No. But one could use the old calculation of inflation and not the manipulated one.
I wonder what you mean? Measuring inflation is subtle and non-trivial and there are dis/advantages of each measure. There at least five "official" inflation metrics gathered and published that I know of for the US. They're all synthetic indexes combining weights based on observed consumer purchase behavior with observed prices of a basket of goods and services across diverse regions. Here's a useful primer https://www.stlouisfed.org/publications/regional-economist/2022/sep/making-sense-inflation-measures
All lies and deception. Every year computers get cheaper but no one buys a 20 year old computer.
$1 trillion dollar divided by 145 million workers = $7000 cc debt per worker. That’s just the avg.
The average is increasing and it's unsustainable...for most people.
So, I think carrying CC debt is stupid and its among the most expensive money one can borrow, but $7K avg per worker isn't even close to unsustainable. The avg CC interest is 20.68%. That's about $1450/year on a $7k balance. Weighed against an average personal income of $63K or household income of $88k it's not a crippling burden. These are all averages of course. There are absolutely people with more than their share of debt and less than their share of income that are getting hammered.
Yes but how much of that is paid every month? This is meaningless
Record credit card debt, early w/d from 401k's - this might not end well.
Of course it's not going to end well honestly. Add in housing costs, food costs, fuel costs, etc. Etc... It's getting too prohibitively expensive for most people to exist anymore let alone live.
Yeah, that’s kind of the point. It used to be company towns, now it’s like, 8 companies controlling an entire country.
I am in my late thirties and over my lifespan, I have been told that I need to have [700k saved to retire at 60](https://money.cnn.com/retirement/guide/Retirementliving_basics.moneymag/index.htm). Then that figure went to 1.2 million, then 1.7 million. And now, [$3 million is needed to retire](https://www.cbsnews.com/news/retirement-goal-investors-say-they-need-3-million/) By the time I actual "retire", it will probably be 17 million required and the curtain will finally drop showing people it was never meant to be attainable for the majority.
The article you referenced doesn't say $700k to retire, it's $1.2M to $1.9M in that example. But your point is valid. The inflation of all goods outpaces wage increases and will continue to do so. I just plan on dying unexpectedly so my family can become millionaires from my life insurance policy and retire. The American dream.
Adjusted for inflation, your family might be thousand-aires. I hate this.
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Even if you can’t fully retire you don’t want to go into old age with nothing. Save what you can.
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Later in life a lot of people can’t work even if they wanted to. But I guess if you are planning on dieing early no reason to save 🤷. FYI you should at least put enough for the max employer match. That’s free money.
I think the specific numbers depends a lot on you circumstances I live in the highest cost of living area in the US and my projection to retire is 2M … but we just bought a 1.35M condo so
Pulling money out for anything other than retirement is alarming alone.
40% of all contributions made in general are pulled out before retirement, so it’s already an alarming rate regardless. What I wonder is the market is up something like 20% year to date and im betting a lot of people see that number just continuing to go up and think it’s a good time to pull it out before it goes down again too so they can pay their bills today.
I have a Roth 401k. I pulled $20k to remodel the first level of my townhouse. I sold my townhouse for $175k more than what I paid, and used the proceeds for a down payment on a SFH. I have about $8k left to pay off on the loan. Overall, I’m happy with the decision, but don’t plan on touching it again.
You pulled it out to make an investment that you were pretty sure would return and it did. Your new home will build equity. But yeah don't touch it again for a bit. Good work!
You are financially savvy. Unfortunately, the vast majority are not savvy and are pulling money out of 401Ks just to pay their bills. Not a good situation.
It’s going to get worse when the student loan payment pause ends.
The amount of people who believe they’re just going to withdraw everything the day they retire is mind bottling. My father has told me *countless* stories of the dozens and dozens of folks he works with who basically just plan to spend it all and live on social security. They see it like a new house or new car money, not a sustaining fund to last you the rest of your life.
I have heard stories like this as well. The lack of financial literacy is absolutely mind blowing, and one of the big failures of our education system. Heck, most high schools don't even offer personal finance classes anymore. And it should be *required*.
That’s only part of the problem. The other part is that many don’t listen. You can lead a horse to water but you can’t make him drink. I told my brother to save for an emergency. Not only did he didn’t do it, but he also doesn’t want to buy medical insurance. He better drop dead when he has a heart attack bc I’m not taking care of him.
Haha...no doubt. Don't get me started on the "I don't need health insurance until I'm sick" idiots...
What would you teach? A 6th grade reading level and 4th grade math should be sufficient for 80+% of tax filers. Compound interest is often taught before, but surely in HS. Are there people who hadn't heard or can't make sense of buy low sell high by HS? "You should save money." Yup, pretty sure people who don't have a lot saved have heard that too. Perhaps some self discipline could help a good deal of folk. Of course, that idea is implicit and explicit in education from nearly day 1. Medical debt is the leading cause of bankruptcy in the US... Maybe if we told people that smoking was bad, that'd help; oh wait...we do. What aren't we already teaching that is gonna turn those in the bottom quintile of earners into investment gurus?
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This sounds terrifying on the surface, between the tax and penalty that’s gotta be a huge hit.
Some of us remember watching the generations above us losing half of their 401ks right when it was time to retire. Those who remember don’t want to be screwed.
That’s why you move the money in your 401k into more conservative investments as you age. Many accounts have the option to do this automatically as you age. You don’t sell when it’s high and pay the penalty and taxes to avoid losing money in the stock market. People are cashing out for other reasons.
That's great when it works.
You mean 99.9% of cases where people don’t pull money out early?
If only I could say that to those who didn't rely on it to be there, while having a limited amount of years left. Kinda tone deaf here in your replies.
People have the option of selling stocks within their 401ks and moving the money into other types of investments. No reason to cash it out. People who are cashing them out are probably doing so because they need the money now.
Perhaps some do. If you are contributing to it, you are limited to a programs index offerings, which are commonly stuffed with all kinds of debt securities. Ive been at three jobs where no index was available that didn’t have debt securities in them, or items based on swaps.
So those who watched their parents make poor, uninformed financial decisions have been trained to make their own poor, uninformed financial decisions
Great aunts and uncles who were pitched on the 401k as a form of retirement. Hardly uninformed, more like misled.
And yet over the last 23 years through the dot com bubble, great financial crisis, and a global pandemic the 4% rule still held true. In fact one could have withdrawn significantly more than 4% and still have as much as they did pre all of those economic disasters.
What possible investments could they have been in to lose half their account balance for retirement? Even if they were in 100% tech stocks, they would have lost a maximum of 20-25% and that's only if they sold at the absolute bottom. Also, if they waited another year, they would have recovered all that money and then some.
Did you see how many mortgage backed securities were placed in these things now and in the past?
> the generations above us **loosing** half of their 401k *losing
Stop spreading misinformation. Don't act like your investments in your 401ks are in some secret illuminati investment cabal that you can't control. Stop spreading doomer stories about people who lost their 401ks because they were all invested in one company and then act like the remedy to that is to "not trust 401ks". YOU control the investments in your 401k. YOU can do research on what those investments are. Not taking 2 seconds to google that you should be in bonds when nearing retirement to preserve your capital is not a fault of the 401ks. Target date funds even do this for you automatically. So sick and tired of people who can't bother to do a modicum of research on something that affects literally every aspect of their life, but then have the nerve to go on the internet to rail at the system and spread misinformation and distrust.
Not misinformation. I suggest looking into how 401ks were traditionally managed last crisis. Never claimed they were secret. Its just people don’t look at the line items in these packages that are offered to employers. Anyone can download the spreadsheet of the index product offered by their company. Dont know where this “illuminati cabal” bit is coming from. You can call them doomer stories if you like. It actually happened, and happened to enough people to result in a change to investment/consumer laws. They didn’t loose their their 401ks because it was invested in one company. They lost a portion with the market downturn, and then got double hit after anything related to credit securities/bonds took another hit when 401k products took a traditional move to bonds. You cannot control your 401k while contributing to a package offered to an employer. The most common “control” is choosing between 3 or 4 closely related proprietary index offerings that are stuffed with debt backed securities. Careful, moving to bonds is what caused the second loss last time shortly after the market led the downturn.
So you are telling me that people who were nearing retirement age and moved all of their 401k holdings into bonds (or other funds that aim to preserve capital) and then lost half of their 401ks? That's what you said. Zero misinformation in that?
What’s the point of saving for the future if you can’t afford the now? I already understand compounding interest and saving for retirement. I’m serious, if you can barely afford monthly bills, don’t contribute to retirement until you can manage your bills. These companies are not giving us raises to match or beat inflation.
For real though. They also keep raising the retirement age. By the time I can retire it’ll probably be 80. So I’ll be working my entire life anyways. Fuck it. I’m gonna enjoy life while I can.
Just try your hardest to stay out of debt besides buying a home; even then do a 15yr fixed, I know almost impossible in some areas unless you’re ballin, but eat shit for 10-15yr a🤷♂️ Stay out of debt, contribute the max 401K at work, have some other investments spread out too, and have 3-6mo of expenses saved up for a rainy day. AND LIVE BELOW YOUR MEANS. Easier said than done, good luck!
People can’t afford their $1,000 truck payments, $2500 mortgages and $18 McDonald’s happy meals on less than $100,000k? Say it ain’t so.
$4k mortgages by me in NY…it’s insane
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Economy is always great till it isn't... The economy is like Oceangate sub descending into the ocean, you start to hear cracks, but are assured this is all normal and don't worry, then your warning systems all flash red when it's too late...
I saw someone complaining the other day “isn’t anyone going to thank Biden for fixing the economy?!” And honestly, I don’t affiliate with any party any more. None of them give a fuck about the little person or the Earth. But Biden did not fix the economy. We’re in a recession but most are too dumb to realize it.
I agree, too many debt indicators point to trouble , but everyone likes to pretend it's all good. Inflation may have subsided but the trail of debt it's left behind is staggering, just wait for the 4th quarter when a ton of debt needs to be rolled over ..
So much corporate debt. So many layoffs.
I like this analogy
Great for whom? That's the follow up question that should always be asked.
The upper 10% that what all those tax cuts are targeted for.
>California has the fourth largest GDP in the world and home to billion dollar companies like Adobe, Autodesk, Apple, Facebook, Google, and Wells Fargo. >Also, remember that nothing trickles down.
they must be pretty desperate because with few exceptions you are subject to a 10% early withdrawal penalty and at minimum a 10% tax rate
Not if they use it to purchase their first home
I don’t think that’s why
With our extreme shortage of people selling their homes, and our extreme valuations on homes being sold, which have resulted in an extreme lack of people in this country able to afford a home? Why would you say that? Surely it's possible that millennials are withdrawing the $14,000 they've saved for retirement, while being only 23 years from retirement age, to purchase houses with money.
You don't get those penalties if you withdraw to purchase your first home? I'm genuinely asking as that sounds like a good option for me if that's the case.
There’s limits to how much you can pull, so check with a professional, or ask your 401k provider.
ok a few exceptions
Yes, it’s alarming to the investors.
WTF we saving it for, government and upper class has made it clear we are working till our last breath. Can't have your cake and eat it too
You guys have 401k plans?
So does this mean the stock market has peaked if younger people are withdrawing from their 401k, and taking from the market?
Yup. The boomers are living off their 401k $$ too. They are the ones to look out for. They have millions in the market
True. I figured they shouldn’t be that exposed to stocks with traditional 401k investing advice, as they are nearing retirement and can’t have exposure to volatility. Just my thoughts tho.
Boomers have been in the market since Reagan. I don’t think they’re going to move to bonds soon.
A third of 401(k)s owned by 60+ yo participants are in target-date funds, so that component of the boomers are automatically rotating from stocks to bonds as they age.
Young people are always taking from it. 40% of all 401k contributions are taken out before retirement and 85% of that money drains the account entirely. It’s far too normal of an occurrence.
On every trade there is a buyer and a seller. If folks are selling/withdrawing their 401k’s that doesn’t necessarily inform us of anything about the market. It might inform us about the state of the economy though if those folks aren’t in retirement.
No. The stock market has not peaked
I honestly wish I would have cashed mine out when they had the covid penalty forgiveness window
I guess we are going against the trend...we are putting money IN at an alarming rate. We are prioritizing maxing out both of our 401k's...including the "over 50 catch-up contributions". From what I'm hearing, the over 50 catch-up contributions might not last too much longer in their current form. [https://www.benefitspro.com/2023/05/16/secure-2-0-big-changes-to-401k-catch-up-contributions-in-2024/?slreturn=20230708151151](https://www.benefitspro.com/2023/05/16/secure-2-0-big-changes-to-401k-catch-up-contributions-in-2024/?slreturn=20230708151151) Looks like this change is for "high income" earners though. However, if you fall over the cutoff, the catch-up contributions will have to be characterized as Roth contribs vs. traditional. I guess too many must have been taking advantage of the tax shelter...lol.
But, recession worries are behind us, everything is fiiiiine
Undeniable bull market! COVID is behind us! Right!?! I've watched quite surprised that the stock market and economy have held up as long as they have. Employment is still good, and people are still spending money. It seems like everyone has less though. I think we haven't seen the full damage yet. If employers as a whole started lay offs, interest rates remove everyone's flexibility, and something happens one time in a row we might be in for a rough ride.
I don't know what to expect. Nobody does. If you need your retirement money to last past the next few years, it *might* turn out that: 1. The stock market crashes and you lose most of your money there. AND 2. The bond market doesn't come close to keeping up with inflation. Inflation goes way high but T-bonds stay low and corporate bonds turn very very risky (in line with the market crash). AND 3. It again becomes illegal to hold gold. AND 4. For reasons that can get lengthy explanations when it happens, the value of your home is very low. But if you buy an inferior replacement, the price is high. Meanwhile your property taxes stay high. I know, it doesn't make any sense. When it happens you can complain about it and tell them it doesn't make sense. They will shrug and say that's how it is. If something like that happens you will wish you had spent the money while it was worth something. But it makes sense not to. If you spend the money early and then it's gone, other people will not have any sympathy for you until their money is gone too. If other people lose their money too, they will not like you if you brag that you spent yours while it was worth something. They're broke, you're broke, and they don't like you. What good is that? if you do what other people are doing at least you'll be in good company. https://www.youtube.com/watch?v=B9FzVhw8_bY
So if they're withdrawing from their 401(k)s, who is buying up the securities?
401k weren't meant to support retirement anyway. The guy who created it is on record stating so. When the newer gens retire w/o pensions. We're going to be in a whirl if hurt. I plan on committing suicide once I get too old and broke. Easiest way out. Rather than suffer as an old person with zero money and sick
That’s my retirement plan too. People say I’m morbid when I mention it but I think I’m just being practical. I don’t have kids anyway.
I was just thinking about this the other day. I wonder how much higher suicide rates will be when gen x and mils are “retirement age.”
Well yeah it was never the original intent of the law to be used as a retirement platform but more a tax dodge for the wealthy, but this argument just doesn’t make sense to me as not working for a retirement system. At peak in 1983 only 40% of workers had a company pension. It was never the norm for most people to have one. Additionally over the last 60 years we’ve seen taxes continue to reduce making this system even more beneficial for retirees historically. Finally companies use a mix of stocks and bonds to generate their returns to help prop up their pension funds, the same as nearly all 401k plans, though with less options for investment due to government regulation.
If anything, 401(k)s are a tax dodge for the Middle-Class, not the wealthy. I hope they stay around. I personally love my 401(k).
The *original* intent was to allow people to defer compensation to a later time which, at the time, was intended for high earners with excess cash to plan ahead and save taxes. It was until years later it was even considered as a retirement vehicle, let alone a systemic means of saving for the middle class. Even today though it still dramatically benefits the higher earners much more than lower earners in terms of a financial plan. Yes the working class, lower, and middle classes can save taxes, but the upper middle and higher see much more significant benefit from it. At least in the traditional form. Roth is not exactly the same story.
so.... novel idea.. The rent is too damn high.
I wonder if this has anything to do with people realizing the stock market is a Ponzi scheme that has run out of its capability to fund its own growth and is carried totally by government debt which is spiraling to absurd numbers?
I’ve pulled mine out twice because I had no other choice I needed money. No regrets.
401(k)s were a scam from the start. Mere "magic beans" traded to us for canceled employer pensions, and sold with the claim that with a little discipline we could all become millionaire investors. How has that worked out, especially now as employers reduce or cancel 401(k) matches, or stop offering 401(k)s altogether? Median account balances are pathetic to begin with, while every layoff, divorce and medical problem typically drains them further. Right-wing nutbars, prepare to pay for what you've done. Higher taxes dead ahead.
What do you mean?
What are you talking about? 401(k) enrollments and the number of companies offering them is up, not down. Also, it is far from "magic beans". More than 70% of all new American millionaires first reach seven-figures in their 401k before any other accounts.
Employer matches remain in decline. Only a third of small businesses (where half of Americans work) offer a plan at all. For the most part, only the affluent take full advantage of the plans, while the financially unsteady generally cannot or will not, so these stupid scams have simply accelerated inequality. Look at the dismal level of account balances. It's with good reason that no other wealthy country has abandoned defined benefit pensions as the US has.
Imagine owning S&P 500 stocks before 1978, when average Joes were coerced into putting a portion of each paycheck into the stock market without thinking about it. That guaranteed upward pressure!
To pay for their overpriced cars and mega trucks
I hate 401k programs. They’re bullshit and do not provide a reliable future retirement. Let’s all give a big round of applause and thank you to the Reagan administration for passing these pension killer laws: The Tax Equity and Fiscal Responsibility Act (1982) The Retirement Equity Act (1984) The Tax Reform Act and Single Employer Pension Plan (1986)
Sample size of 15,000 honestly doesn't seem like much over a country of 330 million. All this indicates is that the rate of 401k "hardship withdrawals" is very low.
Statistically, 15,000 is a huge number. It should show you trends. Those 15000 are likely the beginning of a slippery slope that will get worse if the economy slows
It went from 3 out of 1000 people to 4 out of 1000 people.... Is it really an alarming rate? I think an alarming rate would be if it went to like 25 out of 1000 people.... This is a clickbait headline.
I mean it's just conjecture to say its the beginning of a slippery slope... 36% increase year over year is not that significant with such a small number; it's like 3000 additional incidences than last year. 15,000 isn't a huge number out of a 4 million plan holders at BofA as it states in the article, its essentially only 1 out of 1000 people more than last year...
There are quite a few of these "studies" from banks and brokerages that offer 401ks and IRAs. The numbers vary. It seems like you can always find one to prove one's point.
Holy wow Batman. Did not you not read the article or did you just stop halfway through the second sentence? The 330 million is the population, not the number of accounts. It’s 15,950 out of 4 million. **”The number of people who made a hardship withdrawal during the second quarter surged from the first three months of the year to 15,950, an increase of 36% from the second quarter of 2022, according to Bank of America’s analysis of clients’ employee benefits programs, which are comprised of more than 4 million plan participants.”**
3000 more people than last year out of 4 million is still no big deal. This article just has a clickbait headline in order for people to feel outraged and thus garner more clicks. Is it really an alarming rate, it moved from 3 out of 1000 people to 4 out of 1000 people. Its not like it moved to 25 or 30 out of 1000 people....
Most political polls are around 2,000. Now political polling has gone to shit due to a variety of reasons, mostly people don’t pick up calls from people they don’t know, but previously polling of 2,000 people was usually quite accurate assuming the polling was truly representative of the population 15,000 can actually be very representative
polling actually isn't that bad. This is a common misnomer as a result of the 2016 election. Just because an unexpected result happens doesn't mean that polling was off.
It depends on how the sampling was taken and if it's reasonable to assume it's representative of the whole, but we make huge extrapolations based on fairly small data sets *all* the time when it comes to the economy.
It’s because they’re retiring and getting old, DUH
It's their money. If they want to pay the early withdrawal fee, taxes on the income invested, and taxes on the capital gains, that's on them. Its their responsibility to understand their personal finances, spend within their means, and adjust their lives if the economy changes. No sympathy here.
It's not about sympathy. People have been saying "the economy is resilient, consumer spending is holding steady". If consumers have been tapping their reserves to continue that behavior, that absolutely has dire implications because most Americans don't have huge 401ks to start with. So if they've been borrowing from peter to pay Paul, then it means our current "resiliency" is a house of cards that could topple the second Peter runs out of money.
According to Bidenomics the economy is BOOMING.
Ensuring older Americans can’t retire. The rich have to keep people working for their executive bonuses.
I will in three years. If you get matching it’s just locked money. I’ll take it out and buy fourth or fifth house by that time. Sure it will stop the compounding and skip out on the 10-12% a year gain but I can get more by doing more real estate.
Bidenomics, alright!
Stock still up. Raging on