Budgets remain tight as holiday spending and inflations take a bite out of wallets. For some families, the financial burden has led them to dip into their 401(k) accounts.
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As the COVID-19 pandemic continues to wreak havoc on the economies of the world, an unprecedented number of people are dipping into their 401K retirement savings, according to recent reports.
401K retirement savings plans are commonly used in the United States, where employees can contribute a portion of their paycheck into a tax-advantaged account that they can later use for retirement. However, disturbingly, a significant number of people are using these savings earlier than planned, as they struggle to make ends meet during the coronavirus pandemic.
According to data released by Fidelity Investments, around 2.2 million individuals made a 401K withdrawal in the second quarter of the year — a significant increase from the 1.4 million individuals who took withdrawals in the first quarter. The data also revealed that the average withdrawal amount has increased from $6,000 to $12,000.
These withdrawals come as many Americans experience job losses, pay cuts, and increased medical expenses due to the coronavirus pandemic. Many people who have been adversely affected by the pandemic are using their retirement savings as a safety net to cover their basic needs during these tumultuous times.
However, financial experts have warned against early 401K withdrawals, stating that this could have lasting consequences on one’s retirement years. Experts also believe that individuals should only make 401K withdrawals as a last resort, as there are other options available such as unemployment benefits, credit lines, or other relief programs.
Furthermore, experts have criticized the government for not doing enough to support Americans during these trying times and expressed concerns that this trend of dipping into retirement savings could continue if the situation does not improve.
As the coronavirus pandemic continues to ravage the world’s economies, it is clear that the use of retirement savings as a financial lifeline may become more prevalent. However, individuals should only make 401K withdrawals as a last resort, and the government should take more steps to support the people during these trying times and help them weather the storm without having to resort to dipping into their retirement savings.
I just turned 60, >> I was planning to Retire Soon? BooM the Economy Crashes into Recession and High Inflation ! I guess I will keep working another yr or 2?
duh just put on your credit card and pay $10 a month like most consumers. Credit card is there for a reason.
Borrowing from the future to pay for your present means that you are a slave. Life is cheap when you have little to no debt!
Duh if the people had other savings / saving accounts they would hit them first.
crash Wall Street!! Those rich a$$holes deserve it! I took all mine out when I saw the market beginning to crash a year ago… Paid off my house. If I had left it alone, it would be worth about 2/3 of what it was then. I will deal with the taxes… I refuse to prop up those rich A$$holes that are working people to death to make the profits.
This is all too hurtful to watch!
or you could liquidate everything and jump across to Mexico to avoid the penalties…
65% of people are living pay check to pay check and buy now pay later (layaway) hits record levels. Also car repossessions are rising. 2023 will be catastrophic.