Americans are pulling money out of their 401(k) funds at record rates

[Yo_Mama_Been_Loggin]

Data from Vanguard shows Americans are pulling money out of their retirement accounts early at record rates to help make ends meet.

Last year, 6% of Vanguard's clients took a hardship withdrawal, which allows them to access funds in tax-advantaged retirement accounts, such as a 401(k), before they reach retirement age. That was up from 4.8% in 2024, the asset management giant said.

Taking a hardship withdrawal is not ideal for a few reasons, one of them being that investors are subject to a withdrawal penalty of 10% for taking money out of their account before 59½. On top of that, they are then taxed on any gains. However, perhaps most importantly, they rob themselves of future growth potential on that money, especially if they are still far from retirement age.

Given these negatives, it's generally not a good sign that Americans are withdrawing money from their retirement accounts. It could signal that consumers are increasingly struggling to keep up with expenses and are resorting to extreme measures to do so.

https://www.msn.com/en-us/money/savingandinvesting/americans-are-pulling-money-out-of-their-401-k-funds-at-record-rates/ar-AA1XTj3Y

[lame54]

1. That's sad

[lastlib]

2. No, that's tRump.....

effing up the world for the 99% to keep the billionaires fat & happy.

Yeah, it IS sad....... but it's also

[RT Atlanta]

3. It's super tough for people right now and the republicans literally are not doing anything to help....

So, deliberate choice to begin tanking a generally okay national economy last year - check (tariffs/taxes)

immigration custom enforcement terror in many of our communities - check

a war of aggression for no damned reason whatsoever that happens to threaten oil supplies (and thus what's left of the economy) - check

100% grift and enriching individuals while stealing from the citizenry - check

*******************

republican 'leadership' has by their abdication of the congress' checks and balances in large part contributed to the state of the economy today ....

which is why folks are needed the emergency cash from their retirement savings to make ends meet.

endless $s for wars.... none (apparently) for the betterment of the average citizen and 'mom and pop' businesses.

[MichMan]

5. Why would the recent Iran conflict cause people to make 401k withdrawals last year?

[DFW]

4. I just found out I was at the other end of that spectrum

I got a relatively small check in the mail, unsolicited, from the place that holds my 401k. I read the accompanying form, and it explained that I had reached the point where I was required (?!?!) to start taking money out of it. Except for boosting my tax bill, I see no purpose in forcing me to do that. My 401k literature said that I wasn’t supposed to take money out of it before my employment had terminated, which it hasn’t. I guess someone with more clout than I have has decided otherwise

[MichMan]

6. Required Minimum Distribution at a certain age

[MurrayDelph]

8. And a lot of us who had to take it this year whether we needed to it not

are selling early so we can get away with selling fewer shares before he finishes tanking the market

[DFW]

9. So it would appear.

I was never told. I guess I never expected to be this old. I’m still completely unaware if this means I’m now allowed to touch the rest of my own volition while still working or not (I was told not). If they’re going to pay me out at 2% per year (what this was), and expect me to live to the age of 123, they know something about medicine that most doctors don’t.

I also had no chance to figure out a tax strategy, or if it’s even worth the effort. I don’t know if the IRS gets the tax on this, or if the Germans do. I don’t think 401k distributions are addressed in the Double Taxation Treaty, so maybe it will get treated like much of the rest of my income, and taxed by both (39% in the USA and 47% in Germany—with a few allowances, bringing my net income tax rate “down” to the 73% I’m being asked to pay on most of the rest). If that’s the case, they might as well not bother with the paperwork, and just send the check to the Cape Cod Save The Hermit Crabs Fund, or whatever. For 2%, the paperwork will probably end up costing more than the post-tax amount I get to keep.

[enid602]

7. IRA withdrawals.

Seniors were given an added $6k boost to their standard deduction for ‘25, ‘26, ‘27 and ‘28, meaning they can withdraw a lot more from their IRA’s without paying added tax.I’ll be converting $100k to a Roth IRA during this period,

[DFW]

11. Make sure you don't live in Germany

When Cheneybush drove the economy down below sea level (Dow at about 7800, e.g.), I converted my IRA to a Roth IRA. I was still legally a US resident at the time. I paid 100% of the taxes due then, and was supposedly done. But the Germans are saying that since a Roth IRA is not in the double taxation treaty, they are going tax any distributions I take out of it again (at 47% I presume). Heil Honecker!

[mr715]

10. I'm a Ph.D. candidate

I'm on a razor.

I saved 15 years of my income as a public school teacher into a very generous 501c3.

there is no economic reason for me to finish my doctorate quickly because I'll have to pay loans back before my income ever catches up.

NYC has a generous TDA program for DUers that are willing to serve as teachers. Just don't have student loans.