Struggling Americans Tapping Into 401(k)s More Than Ever

spending his last money

The number of signs indicating that Americans are facing financial difficulties continues to grow all the time. And one particularly worrying indicator is the fact that more and more Americans are starting to tap into their 401(k) accounts for emergency funds.

401(k) and similar retirement accounts, such as 403(b), TSP, and even IRA accounts, aren’t supposed to be rainy-day accounts or a source of quick cash. They’re supposed to be retirement accounts that help investors build up stable sources of income for retirement. And that means that they’re supposed to be “set it and forget it” types of accounts in which investors focus on long-term investments and long-term asset growth.

Many of the regulations surrounding 401(k) and similar retirement plans reflect that intention. Nonetheless, there are limited exceptions in which people can draw on their 401(k) funds if they absolutely have to. But the fact that so many Americans are doing so today is worrisome, as it indicates that households are increasingly having a tough time making ends meet.

How Big Is the Problem?

It’s important to keep in mind that it isn’t a huge amount of people tapping their 401(k) accounts. Of over 4 million people surveyed, only around 16,000 had to take hardship withdrawals from their accounts, or less than 0.5%. But that still represents an increase of 36% year on year, and 12% quarter on quarter.

When you consider the number of people who took any money at all out of their 401(k) accounts, that number jumped to over 75,000 people, itself again a more than 30% increase from the previous year. So while this still isn’t a huge number of people tapping into their retirement savings to make ends meet, the massive percentage increase is what’s really concerning.

American households today seem to be more cash-strapped today than ever. Household debt is at record highs, credit card debt is at all-time highs that are triple what they were in 2008, and Americans have just about exhausted the money they were able to save from their stimulus payments.

As much as the mainstream media like to pretend that everything is fine, and that continued consumer spending shows the economy is strong enough to stave off a recession, the reality seems to indicate that the only reason consumers are able to spend is because they’re tapping credit cards and retirement accounts, the last ditch attempts to keep their standard of living afloat. And after that runs out, what recourse do they have?

Protecting Your 401(k) Assets

Most likely you’re not one of the people tapping their retirement accounts to pay for everyday expenses, or even for emergency spending. But it you’ve built up sizable amounts of retirement savings in your 401(k) accounts, you may be nervous about whether or not you’ll be able to maintain those assets in the event the US economy falls into recession.

You’re not alone in that fear either. After the large bank failures earlier this year many Americans began to realize that the money they’ve worked so hard to save and invest isn’t something they can take for granted. If you’re not proactively staying on top of your savings and investments and taking steps to protect them, there’s no telling what could happen in the event of a severe financial crisis.

While many Americans began to shift their money from bank accounts to money market funds, many others tried to figure out what to do with their retirement savings in tax-advantaged accounts like 401(k)s. Taking money out of retirement accounts can result not just in a tax hit but also in potential penalties if you’re under age 59½. But is the tax hit worse than potential losses? Or is there another way to protect your 401(k) that won’t hurt you financially?

Your 401(k) and Gold

Gold IRAs have only been around for about 25 years, but they’re beginning to make an impact in the precious metals industry and in retirement planning. A gold IRA is often funded with a rollover from a 401(k) account, a rollover that can be made tax-free. That allows you to move the funds you already have in your 401(k) into a new gold IRA without having to first take a distribution and pay taxes.

The funds you roll over from your 401(k) to a gold IRA can then be used to buy physical gold coins or gold bars, assets which are managed by your gold IRA custodian and stored in a bullion depository. And when you decide to take a distribution from your gold IRA, you can take it either in physical gold or in cash.

A gold IRA gives you another tool in your investment portfolio, a way to diversify your retirement savings so that they’re not completely dependent on the health and strength of Wall Street for their performance. And given gold’s long-term price growth, a gold IRA could be a useful way to strengthen your financial well-being over the long run.

Opening a gold IRA doesn’t have to be difficult either. Goldco has helped thousands of our customers navigate the gold IRA process, helping our customers benefit from adding gold to their portfolios. Our team of experts is ready to answer your questions about gold IRAs and help you get on the road to protecting your wealth with gold.

With over $2 billion in precious metals placements and over 5,000 5-star reviews, Goldco is committed to customer service and satisfaction. We work with mints around the world to bring our customers quality gold coins of guaranteed authenticity. Whether you’re looking to make a $10,000 direct cash purchase or roll over $1 million in retirement savings, our representatives are happy to work with you to make your dreams of owning gold come true.

Don’t wait any longer to start protecting your hard-earned retirement savings. Call Goldco today to learn more about how gold can help you safeguard your savings.

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