What would you do if you had limited funds but big financial obligations?
One in four Americans answer by dipping into their retirement plans to pay for more immediate needs such as tuition, overdue bills, credit cards and mortgages.
American households withdraw a total of more than $70 billion from 401(k)s or similar retirement savings plans for nonretirement spending needs every year, according to a new study from HelloWallet.
With the erosion of traditional pensions and constant threats to Social Security, many private sector workers are relying on their 401(k) nest eggs to help provide financial stability before they retire, potentially damaging their ability to maintain their standard of living during their retirement years.
In the aftermath of the Great Recession and increased "leakage" from 401(k)s, policymakers and retirement savings experts are concerned about the further breakdown of America's retirement system. Some are looking for ways to reform 401(k)s including increasing worker contributions by 1 percent annually as well as monthly statements with retirement income need projections.
Others experts such as economist Teresa Ghilarducci are offering innovative alternatives to 401(k)s that would provide workers with guaranteed retirement income. We are going to have to find new solutions if future generations of American workers are to achieve the dream of a secure retirement after a lifetime of hard work.