By Kirsten McIntyre, NEWS 9
As the sloping economy continues to strain Americans, some are dipping into their retirement savings earlier than originally planned.
Twenty-six-year-old Chris Fickey has a jumpstart on saving for his golden years. He signed up for his company's 401(K) plan right after graduating college.
"I do hope to save up enough so I can retire when I'm in my mid-60's," Fickey said.
Like most Americans, Fickey planned to leave his 401(K) money alone until retirement. A growing number of consumers are in such dire straits, they're literally cashing out part of their 401(K) plans to early through something called a hardship withdrawal.
"With the increase unemployment rate, the downturn in home value and home equities, I'm pretty sure that that's driving a lot of those increases," Rick Meigs of the 401(K) Help Center said.
Experts said it's a troubling trend, with some of the nation's largest plan administrators seeing double-digit spikes in cases.
Mary Jo Harper, a financial advisor for Merril Lynch, said people should consider if a withdraw is necessary before running to the 401(K) option.
"A hardship withdrawal is something you want to consider as your very last alternative at accessing money for a specific emergency," Harper said.
By law, someone can only qualify for the withdraw under certain financial hardships. These hardships may include unreimbursed medical expenses, college tuition or potential eviction or foreclosure.
"The IRS and Congress don't want people depleting their retirement accounts for frivolous reasons," Meigs said.
For those people dipping into the savings, steep penalty charges follow closely behind the withdrawal.
"It sets you back on your retirement game plan," Harper said.
The finical side-step is a move Fickey doesn't plan to make.
"I'm fortunate not to have to worry about that right now, but if the situation posed itself, you have to make a decision," Fickey said. "You have to do what you have to do, right?"
Experts said hardship withdrawals are acceptable in the face of a true emergency. They warn though, to consider other options first. People considering the withdrawal could also consider taking a loan out from your 401(K), if your plan allows.
For those not facing a foreclosure, experts suggest homeowners consider refinancing since interest rates are down again, or taking out a home equity loan.