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CCH® PENSION AND BENEFITS — 5/07/08

One-fourth of participants have taken premature plan distributions, poll finds

About one-quarter of adults who are actively planning for their retirement have made premature withdrawals from their 401(k) plans, IRAs, or other retirement investment products, according to a Wall Street Journal Online/Harris Interactive Personal Finance Poll. The survey of 2,897 U.S. adults ages 18 and over was conducted by Harris Interactive® between March 6 and 10, 2008 for The Wall Street Journal Online.

According to the survey, the most common reasons for premature withdrawals include a family member losing a job and the cost of a down payment on a home. Financial pressures that motivate premature withdrawals seem to begin at age 35, when nearly one-third of respondents report doing so. Respondents under the age of 35 are more likely to withdraw funds for mortgage payments than older respondents.

Wealthier, full-timers less likely to make early withdrawals

Wealthier respondents with income of at least $50,000 are less likely to have prematurely withdrawn funds from their retirement plans, the survey found. Those in the lowest income tier, with income under $35,000, are more likely to be affected by a death in the family and require premature withdrawals. However, only 35% of this employee segment is actually planning for retirement.

Adults employed full time feel the least pressure to withdraw funds prematurely from their retirement plans, with nearly 70 percent of those actively planning for retirement never having done so. The part time employed experience more pressure in housing related expenses and are more likely to prematurely withdraw funds for a down payment on a home and for mortgage payments, the poll found.

Nearly one-third of adults who have prematurely withdrawn funds from their retirement plans said they cannot pay them back, the survey discovered, and 45 percent either cannot pay back the funds or have not begun to do so. Those age 45-54 are more likely to be unable to pay back their premature withdrawals. The youngest adults, 18-34, seem to be more financially responsible or less financially burdened, and are more likely to be currently making payments. Among the oldest respondents who have prematurely withdrawn funds, one-quarter of respondents are still actively contributing to their retirement plans. Even among the highest income earners, with income over $75,000, more than one-quarter of respondents said they cannot pay back their premature withdrawals. The lowest income earners are more likely to have not begun to pay back their premature withdrawals, the survey found.