Retirement Plan “Leakage”

Apparently “Leakage” is a big problem for retirement plans.  I continue to read of industry commentators who believe that  people taking money out of their retirement plans is a “problem” that has to be “solved.”  OK, sure, I do not support anyone taking money out of their retirement plans – if they don’t have to!  Who would support that?  It is disappointing to see anyone withdraw from their accounts and diminish the value of an asset important to their future.  However, I am curious how many of these commentators have assisted real people.

I have been working with employees of mostly non-profit organizations for almost 20 years now and have dealt with thousands of people and have handled hundreds of distributions.  Many of these people are middle and lower income.  I can only recall one, maybe two, that were done casually. Seriously!  Most of these people knew what they were doing, understood its impact on their future, and felt bad that they had to do the loan or withdrawal.  Many were in costly debt and had few other resources.  But unfortunately, people make mistakes or experience bad luck – life happens!

So, it is just my experience – but I have quite a bit of it.  I have practically never encountered a client that took money out of their retirement plan that was not in a very difficult situation with seemingly no other good options.

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