More on 401(k)’s

Inquiring minds are reading the Contra Costa Times regarding Bay Area jobless tapping 401(k) plans. Since there are few prospects for jobs, some of the Bay Area’s jobless are sacrificing their future retirement security for day-to-day survival:

As the recession drags on and savings are exhausted, they’re turning to their 401(k) retirement plans for money to pay for mortgages, health care insurance and daily expenses, even though they rack up stiff penalties and lock in market losses from the crash.

People are hurting and having to make tough decisions:

Breana Bartholomew, 53, an accountant, says she doesn’t have much choice. She’s working two part-time jobs — one in San Jose and another in Gilroy — after losing a full-time job in December 2008. Her income is only one-fourth of what she made before.

Her emergency savings gone, Bartholomew said she is using her 401(k) to pay her health insurance premiums. “I’ll lose about 50 percent to taxes and penalties” and market losses, she said.

Electronics engineer Robert Sweat, 36, of San Jose said he had to cash out his 401(k) to make ends meet after losing his job with Pillar Data Systems in October 2008.

“It’s for your retirement, and it’s a very large percentage of it that gets taxed,” he said.

Sweat came to the Silicon Valley in 1998, building up a tidy sum in his 401(k) while working on a missile defense system project at Lockheed Martin in Sunnyvale. He dipped into it to keep himself afloat financially after being laid off. He eventually rolled over what was left into Pillar’s pension plan. Laid off again in
2008, he has borne the brunt of the recession ever since.

“Once again, I had to turn to my savings to support myself. The 401(k) I had to burn out because I needed the money.”

There is so much more here that the full article is a must read.


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