Some 4.8% of account holders took early withdrawals last year for reasons such as preventing foreclosure and paying medical bills. That is a record high, up from a prior record of 3.6% in 2023 and a prepandemic average of about 2%.
What, you subsidize/force people to fork over a portion of their earnings into a locked financial product... and then you're surprised when people do everything in their power to solve financial emergencies by drawing on said account?
The 401(k) has become a rainy-day fund because more employers are automatically enrolling their workers, including people that otherwise have little savings. Congress has also made it easier to use retirement savings for emergencies.
Retirement plans are designed to keep Americans’ savings out of reach until later in life. But the Internal Revenue Service allows withdrawals for hardship-related reasons, including paying tuition and buying a primary residence. People who take hardship withdrawals from traditional 401(k) accounts must pay income tax, plus often a 10% penalty if they are younger than 59½ years old.
10%, and flip the amount in BTC is a non-Morgen Rochard approved yolo way of maxing risk (and reward?!) (@Aardvark doesn't; like me, he has what-if-I'm-wrong-about-bitcoin insurance #898036).
It seems you can also do a penalty-free withdrawal of up to a thousand bucks once a year. Epic!
Apparently people also borrow against their 401(k)s? That's new to me:
The share of participants with outstanding 401(k) loans at the end of 2024 remained at the 2023 level of 13%.
America sure keeps things interesting.
Here's a novel idea: What if people get to keep their own money, and spend/dispose/save as they see fit? [insert green dinosaur meme]
Revolutionary, I know.
Non paywalled here:
https://archive.md/sfZGr