But, What Are They To Do?

We’ve often claimed that defined contribution plans were little more than a “glorified savings account”, and the following data from GoBankingRates supports our conclusion.
apping into one’s retirement dollars early is considered to be a foolish practice. But, because most Americans don’t save outside of their employer-sponsored plan it becomes a necessity when an emergency arises.

According to a recent report by GoBankingRates, a significant percentage of Americans are hitting their retirement accounts and in most cases (85+%) it is to fund debt payments, including emergency expenses, such as a medical bill or to bridge an unemployment situation.


We are pleased to see that folks aren’t tapping their retirement plans to fund college costs or home purchases. But, plan borrowing limitations (50% of plan assets or $50,000) may be tempering those activities.

At KCS we recommend creating a six-month cash reserve to cover day-to-day expenditures and the emergency bill that might crop up.  However, most Americans are not in a position to build this type of nest egg, as real wages have been fairly stagnant for the past couple of decades, while the cost of education, insurance, housing, etc has ratcheted up.  We’ve previously reported on the significant percentage of Americans who cannot cover an emergency $400 expenditure – it is frightening!

GOBankingRates polled nearly 2,000 people who dipped into their retirement funds.

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