NUMBER OF THE DAY
Why Few Americans Are Raiding Their Retirement Accounts, by the Numbers
The workers who most need emergency funds are least likely to have a retirement account
4.5%: That’s the share of Vanguard 401(k) account holders who have taken advantage of a temporary period in which they can withdraw from their account without penalty according to the Wall Street Journal.
In late March, as part of the CARES act, Congress allowed Americans to raid up to $100,000 from their tax-advantaged 401(k) accounts without incurring the usual 10% early withdrawal penalty. But a raft of 401(k) providers, including Vanguard, Fidelity, and T. Rowe Price told the Journal that fewer than 10% of their account holders opted to do this so far.
The proportion of people who chose this option may be tiny partly because low-income workers who most need to tap into an emergency fund like a retirement account are least likely to have one.
It’s also possible that many 401(k) holders simply missed the news that they can make penalty-free early withdrawals from their retirement accounts, resorting to other sources of emergency funds like borrowing from family, taking on credit card debt or selling off belongings for cash.
