More Raiding Retirement Funds Amid Economic Woes
As the economy heads south, and expenses head north, financial investors report more people are dipping into their retirement savings.
Steven Dimitriou, with Mayflower Advisors, says those who bought houses in the last five years are suffering the most because mortgage rates have skyrocketed.
"I tell people it's a bad idea to take from a 401K account. That should be a last resort," says Dimitriou.
To illustrate how it could erode a person's savings, he gave an example. If a homeowner withdraws $10,000 from their 401K, they would have to pay about $3,800 more at the end of the year in penalties and taxes.
Then, at 8 percent interest, here's how much money would be lost over time:
10 years=$21,589 loss
20 years=$46,610 loss
30 years= $100,627 loss
"When people are desperate for money, they aren't thinking about the long term impact, but this could really hurt," Dimitriou said.
According to a new study, in 2004, Americans borrowed $31 billion. In 1989, they borrowed $6 billion.
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