Early returns indicate the recession has caused more people to take withdrawals from their retirement plans for reasons other than rolling them over to other plans or because they've retired.
Investment manager Vanguard reported the number of workers who borrowed money from their 401(k) plans in the first half of last year increased 6 percent. Non-hardship withdrawals, made by workers 59 1/2 and older while still on the job, rose 14 percent during the same period.
"We speculate that the increase in loans and non-hardship withdrawals is related to the general economic conditions," Vanguard said.
Hewitt Associates reported loan activity was up 10 percent and hardship withdrawals were up 20 percent as of late last year.
While it will take time to collect and analyze 2009 data, reports based on 2008 data indicate the recession at that stage hadn't caused participants to change their behavior dramatically.
A new Hewitt study found that 46 percent of Americans who left their jobs last year cashed out their 401(k) balances instead of rolling them over to IRAs or their new employers' retirement plans. The Lincolnshire, Ill., human- resources consultant said that compares with a cash-out rate of 45 percent in a similar 2005 study.
Younger workers and those with smaller balances in their retirement accounts were more likely to pocket their retirement savings despite the tax consequences. Hewitt's research showed 60 percent of workers between 20 and 29 cashed out their 401(k)s when they left their jobs, versus 43 percent of those ages 40 to 49 and 34 percent of those 50 to 59.
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