Why Are Americans Tapping Their Retirement Accounts?

As a follow-up to our previous blog post, the St. Louis Federal Reserve is reporting that “real” weekly wages since Q1 1999 have only grown from $335 to $350 through Q1 2018. Is it not surprising that a significant percentage of Americans are either not saving for retirement or they are forced to tap into their retirement accounts to meet an outstanding debt or an emergency bill.

Come on, the cost of everything, including housing, education, healthcare, food, clothing, etc. would have a worker needing far more than an additional $15 per week for the last 20 years! Even the WSJ is reporting today that the anticipated wage bump from tax changes and the perceived tighter labor market are not being reflected in workers’ pay once adjusted for inflation. The timetable that they are highlighting is the most recent three years.

Despite recent strength in retail sales, diminishing real wage growth should negatively impact the US economy as the consumer gets more stretched. A further increase in debt will naturally lead to more Americans tapping into their retirement accounts, which just exacerbates an already untenable situation.

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