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Venture

Robert Trigaux

Perils and pitfalls of tapping retirement savings

4

December

Wake up and good morning. Sure, we've heard all the retirement jokes. My 401(k)'s now a 101(k). When did my IRA become my IOU? Truth is, despite the economy and rising layoffs, most Americans aren't dipping into those retirement accounts to cover expenses just yet. Many Americans are coping by reining in their spending, according to a Principal Financial Group survey. And some are saving less, according to today's just-released 2008 Bank of America Retirement Savings Survey.

But 18 percent of Americans said they have withdrawn retirement assets prematurely because of the recent economic turmoil, according to BofA's survey.The top three reasons for early withdrawals? Credit card debt (25 percent); mortgage payments (22 percent), and recent job loss (22 percent). The findings show 62 percent of the general public and 44 percent of affluent respondents are either behind schedule or have not started retirement planning. Compare that to 53 percent and 36 percent, respectively, in a March survey. Here's a more complete story on the survey.

The report states that for many Americans retirement has been pushed back. More than 40 percent said they believe they now face more years in the work force compared to a year ago. Among affluent Americans, 36 percent expect a longer career. So do 31 percent of respondents 50 or older. Still, 68 percent surveyed said -- if only because of indecision -- they haven't changed the way they save, invest, or manage retirement assets in the last three months. But Bank of America does offer this warning:

"If the economy continues to worsen, these numbers may increase significantly. The possibility of many more Americans dipping into their retirement savings could have profound implications for the country's future economic well-being."

The related survey just out from the Principal Financial Group offers some interesting details into how folks are adjusting their lifestyles and expenses in the midst of such economic upheaval. Among the more compelling examples:

* Changes in holiday plans: 52 percent of workers and 41 percent of retirees said they will spend less money per gift,  49 percent of workers and 31 percent of retirees plan to trim the number of people receiving gifts, and about one-third of both workers and retirees plan to travel less.

* Giving: 25 percent of workers and 27 percent of retirees plan to donate less to charities.

* Tighter budgets: Here are some ways workers and retirees say they have cut expenses from their monthly budgets: Media subscriptions (27 percent workers, 31 percent retirees); gym membership (14 percent workers, 9 percent retirees); landline phone service (13 percent workers, 6 percent retirees); lawn service (12 percent workers and retirees), and television services (11 percent workers and 3 percent retirees).

* Job security: 41 percent of workers worry their company will cut employees in the next year (up from 25 percent last year); 10 percent of workers are concerned their company will go out of business in the next year (up from 6 percent last year); and 44 percent of workers say they have no concerns about the future of their company (down from 53 percent last year).

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 12:23pm]

    

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