401(k) Loans and Hardship Withdrawals Rise at Alarming Rate -A New Horizon ... PR Web (press release)
Fort Lauderdale, FL (Vocus) August 31, 2010
Last year Americans 401(k) retirement accounts experienced a huge reduction in value due to falling financial markets. These very same retirement accounts are now facing another attack of sorts; this time from within. American workers are initiating loans or hardship withdrawals from their 401(k) retirement savings accounts at an unprecedented rate. A New Horizon Credit Counseling Services, Inc., a nonprofit credit counseling firm, has been advising its clients and the public on ways to avoid jeopardizing their future retirement by making wiser choices.
Steven Stark, COO of A New Horizon Credit Counseling, comments that “this trend of borrowing against, or withdrawing funds from retirement assets for critical living expenses is alarming and may be avoided with proper financial management, credit counseling and, if suitable, a structured debt management plan”.
According to reports on 401(k) plans that it administers, Fidelity Investments, found that, loans initiated over the 12 months ending June 30, 2010, grew from 9 to 11 percent of total active participants; and hardship withdrawals, grew from 2 to 2.2 percent of active participants. Mr. Stark further stated “while loans and hardship withdrawal can sometimes be unavoidable, it is critical that the employer and plan administrators make the participants aware of the consequences of their action that will result in significant penalties, which could be up to 40%, once state and federal taxes are added to the 10% penalty, and have long term impact on their retirement options”.
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