During the frenzy of the housing bubble, in the middle part of the previous decade, many homeowners turned to home-equity loans in order to get some quick cash. Rapidly rising home prices made that very easy to do, but with the collapse of the housing market in 2008, it soon became out of fashion. Since they peaked in 2007, the nation's total amount of home-equity loans has dropped by 38 percent, according to the Federal Reserve.
What has replaced the home-equity loans as a source of ready cash? Unfortunately, it's the 401(k). In 2011 - the most recent year for which we have figures - the IRS collected $5.7 billion in penalties for early withdrawals from 401(k)s. Since the penalty is 10 percent, that means we took out a collective $57 billion from our 401(k)s.
A total of 5.7 million tax returns paid penalties for early 401(k) withdrawals in 2011. Adjusted for inflation, such withdrawals have increased by 37 percent since 2003. That's a shame given how many people haven't saved enough for retirement in the first place.
No comments:
Post a Comment