From WWW.FOXBUSINESS.COM
A record-breaking number of Americans are making emergency withdrawals from their 401(k) retirement plans in order to cover a financial hardship as high inflation rages, according to new data from Vanguard Group.
Nearly 0.5% of workers participating in employer-sponsored 401(k) plans made a so-called “hardship” withdrawal in October, according to Vanguard, which tracks about 5 million accounts. That marks a major increase from the 0.3% rate recorded during the time last year and is the highest level since Vanguard began tracking the data in 2004.
“The recent increase in households drawing on their employer-sponsored retirement accounts could be a sign of some deterioration in the financial health of the U. S. consumer,” said Fiona Greig, global head of investor research and policy at Vanguard.
Hardship withdrawals allow workers to tap their 401(k) for an “immediate and heavy financial need.”
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Individuals who make these types of withdrawals owe income tax on the money and could be hit with a 10% early withdrawal fee if they are under the age of 59½. However, the penalty can be waived if workers provide adequate evidence that the money is being used for a qualified hardship, such as a medical expense.
A person who takes a hardship withdrawal also cannot pay it back to their 401(k), and cannot roll that money into another retirement-savings account…. (Read more)
