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Fidelity Sees Surge in 401k Hardship Withdrawals

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A record number of workers made hardship withdrawals from their retirement accounts in the second quarter, according to Fidelity. Even worse, the number of workers borrowing from their 401k reached a 10-year high, the investment firm reported today.

During the second quarter, 62,000 workers initiated 401k hardship withdrawals, an increase of 37 percent year-over-year. As well, 45 percent of those who took hardship withdrawal in 2009 took another one this year. According to Fidelity, the average age range for those seeking hardship withdrawals is 35-55.

Fidelity-administered 401k investment plans have 11 million participants.

Last but not least, here's a funny bit of misunderstood news that was reported as "good news" by one of the top three news organizations in the country: "The good news in the report was that the average 401(k) account balance as of the end of the second quarter was $61,800; up 15 percent from the same time last year, but down from the end of the first quarter of 2010." Hahaha. That's not good news at all!

First of all, that balance increase includes both worker contributions and at least some matched contributions by employers. Second, the S&P 500 over the same time was up nearly 30 percent. Hahaha! By any measure! What it means is that even AFTER contributing to their 401k's for a full year, the average balance couldn't even keep with with half of the S&P 500's gain over the same time span! That's horrible!

Good lord. No wonder people view the stock market and investments as a scam.
POSITION:  No positions in stocks mentioned.