Home Economy WSJ: Companies Discourage Employees From Raiding 401(k)s

WSJ: Companies Discourage Employees From Raiding 401(k)s

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                WSJ: Companies Discourage Employees From Raiding 401(k)s

Companies reportedly are trying to discourage employees from borrowing from their 401(k) retirement accounts in an attempt to ensure that older workers can afford to retire and make room for younger, less-expensive hires.

“Employers of all types—from Home Depot Inc. to a mortgage lender—are taking steps to better inform workers of the financial implications of borrowing from their retirement accounts and pulling the money out when they leave jobs,” the Wall Street Journal reported.

Tapping or pocketing retirement funds early, “known in the industry as leakage, threatens to reduce the wealth in U.S. retirement accounts by about 25% when the lost annual savings are compounded over 30 years,” WSJ.com cited an analysis by economists at Boston College’s Center for Retirement Research.

“Employers have done a lot to encourage people to save in 401(k) plans, such as automatically enrolling them. But there is a growing recognition that if the money isn’t staying in the system, the objective of helping employees reach their retirement goals isn’t being met,” says Lori Lucas, defined-contribution practice leader at investment-consulting firm Callan Associates Inc.

To be sure, retirement and pension funds of every shape and form are in a precarious position.

The New York Teamsters Road Carriers Local 707 Pension Fund reportedly has officially run out of money as the federal insurance company has taken over payments to retirees at a reduced rate.

Sadly, the Pension Benefit Guaranty Corp. (PBGC) itself is also running out of cash funds to cover union pensions, its director said recently.

The federal agency’s limited liquidity "is part of the spiraling U.S. pension crisis that threatens to wipe out the retirement savings of more than a million Americans," the New York Daily News reported.

(Newsmax wire services contributed to this report).

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