Tuesday, January 15, 2013

What's REALLY Undermining Retirement Security?

Washington has done a lot of looking at retirement security in the last few years.   We've witnessed debates about how to get Americans to save more and how to protect savers from supposed conflicts of interest that likely don't exist (fiduciary anyone?)  The Washington Post is out today with a look at another angle in the crisis, Americans withdrawing from retirement savings to pay current expenses.

Key point:
More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.
In terms of solutions, there is one interesting idea at the end. Encouraging workers to establish "emergency savings accounts" that could be withdrawn tax free AND THEN "plowing money" into tax-sheltered retirement savings.

Interesting stuff. Unlike some other debates, this would appear to be a real problem that deserves attention.