Some folks are worried that a stock market crash will take place because as baby-boomers start to take out savings from the stock market & retirement accounts. Others that I have talked with have said, not possible, that the amount of dollars that are being put into the market will exceed the amount that baby boomers will be putting in.
However, here is an article that may change both of these hypothesis again, but re-enforces what I was figuring, the stock market will more than likely dip again. But for another reason outside of what I had been thinking – people are tapping their 401K’s as a last resort. So even right now, their accounts are holding, but people (not just retirees) are having to pull money out of their accounts much sooner than they expected.
I like how the article quotes the stock broker saying what a mistake it is to pull your money out of the market – guess who’s money he is most worried about – HIS! By pulling your money out of the market, you are effecting his paycheck – his mind is on his own best interests rather than yours.
People that are pulling money out of their 401K are doing so even though they are facing tough penalties for doing so. I think it is a sad sign of the times.
Those making hardship withdrawals would pay taxes on them at their personal income-tax rate and could face a 10% penalty. Loans carry a set of drawbacks even though participants are repaying themselves instead of a lender. Investors miss out on potential market gains on the amount loaned. In addition, the balance is repaid in after-tax dollars. Those dollars are taxed again when the money eventually is withdrawn during retirement.