Underemployed, employed draining 401(k) accounts
By National Underwriter
By Warren S. Hersch
Among unemployed and underemployed individuals who had a 401(k) or similar defined contribution plan at their most recent employer, 43 percent have taken a cash withdrawal from their account, according to a new report.
Transamerica Center for Retirement Studies discloses this finding in the 14th annual survey, “Repairing the Damaged Nest Egg: How to Improve the Retirement Outlook of the Unemployed & Underemployed.” Based on a Harris Interactive poll of 610 unemployed or underemployed people, the report explores how un/underemployed workers can better prepare for retirement. The study also details recommendations for the retirement services industry, media, employers/plan sponsors and policymakers to work with the un/underemployed.
The report reveals that more than half of the unemployed (53 percent) and 38 percent of the underemployed have taken withdrawals. This compares with 63 percent and 34 percent, respectively, of un/underemployed who took withdrawals from a previous employer’s self-funded plan.
The report adds that single people (44 percent) are slightly more likely than married people (41 percent) to have taken a withdrawal.
The study adds that only 38 percent of the un/underemployed are somewhat or very confident that they will be able to retire comfortably. The majority of those who have been un/underemployed for less than a year are not too confident or not at all confident. The percentage rises to 68 percent among those who have been un/underemployed for more than a year.
Of the un/underemployed holding a retirement account, 80 percent are at least somewhat familiar with the taxes and penalties incurred when taking an early withdrawal from that account, the survey states. This is down from 87 percent of respondents in 2012.
The report estimates total household retirement savings among the un/underemployed at $7,500 in 2013. The unemployed report an estimated median total household retirement savings of $6,500 (versus $2,400 in 2012), while the underemployed have saved $8,600 (vs. $7,400 in 2012).
Forty percent of the un/underemployed have saved less than $10,000 in total household retirement accounts, the study adds.
Originally published on LifeHealthPro.com