July 12, 2024

Political Commentary

News Politics Business Sports

Too Many Americans Are Making This Retirement Mistake

2 min read

SmartAsset: Alarming number of working Americans cash out retirement accounts when changing jobs

The very essence of a retirement nest egg lies in the concept of patient growth and compounding of investments over time. Its purpose is to offer a bountiful reserve of funds when one bids farewell to the workforce, ensuring a comfortable retirement. However, a disconcerting trend has emerged, as a significant portion of younger workers succumb to the temptation of prematurely shattering their nest eggs.

The result is a tax bill, fines for early withdrawals, lost contributions and a diminished – or vanished – account balance likely to come up short at retirement time. We’ll discuss the details.

A financial advisor can help you organize your retirement savings and make sure you are set up to meet your financial goals.

Workers Are Cashing Out Their 401(k) When Leaving Their Jobs

According to a study from the UBC Sauder School of Business, more than 41% of workers who were leaving their jobs cashed out their employer-sponsored 401(k) retirement plans early. That’s up from the pre-pandemic level when about one of every three departing workers withdrew cash or completely emptied their accounts.

There are a number of financial problems with such a move. One of which is because contributions are tax-deferred, the withdrawals are treated as ordinary income, subject to the worker’s marginal tax rate.

In addition, the internal revenue service (IRS) takes a second cut, adding a 10% penalty for withdrawals made before age 59.5 (although there is an exception available to workers 55 and older).

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Other Financial Consequences

Workers may also sacrifice some of their 401(k) employer’s match if their account isn’t totally vested, which can take as long as four years. In addition, the worker loses out on the valuable long-term compounding for all of that untaxed…

2023-12-02 09:58:12

All news and articles are copyrighted to the respective authors and/or News Broadcasters. VIXC.Com is an independent Online News Aggregator

Read more from original source here…

Leave a Reply

Copyright © All rights reserved. | Newsphere by AF themes.