Mercer Sees "Worrying Increase" in Retirement Plan Withdrawals

Posted by: Lauren Young on January 15, 2009

There’s even more evidence that investors are curbing retirement plan contributions.

Consulting Mercer giant says more retirement plan participants are requesting withdrawals compared to last year—requests rose 59% in November and December of 2008, according to a press release from Mercer.

And since July, there has been a steady increase in the number of participants who have cut their retirement contribution rate to zero. Overall, Mercer saw more participants decrease rather than increase their contribution rates throughout 2008—“a trend rarely seen in more stable economic times,” Mercer says. These transactions, however, still represent a small fraction of overall plan participants, averaging less than 1% in both cases.

“The small number of people represented in these findings is the good news,” Eric Levy, Retirement Business Leader of Mercer’s outsourcing business, said in the press release. “What should sound the alarm with plan sponsors, however, is the growth trend, not the absolute figures. As most experts would agree, withdrawals from 401(k) type retirement plans and reducing participant contributions to zero are two actions that are completely counter to preparing for retirement. This may point to the dire straits that a small but growing number of participants find themselves in where withdrawals and zero contribution rates are seen as a type of financial last resort.”

Mercer believes that in order to counter these trends, plan sponsors should increase communication to participants regarding the benefit of long-term retirement savings, highlight the availability of educational and planning tools such as websites and seminars, and re-evaluate plan designs based on current participant behavior and trends.

Other Mercer findings:

Some 28% of 401(k) retirement plan participants have seen a 30% or more decrease in their account balances in 2008 through December.

Despite these results and the general economic turmoil, relatively few (14%) retirement plan participants conducted any kind of exchange in their 401(k) accounts in 2008. This group, however, shifted assets dramatically from equity markets into capital preservation funds. In fact, compared to the same time frame last year, balances and plan contributions in stable value and money market funds grew 70% compared to 2007, while equity funds contributions decreased.

Mercer’s findings are based on the January to December 2008 behavior of the 1.2 million participants for whom it administers employer-sponsored defined contribution retirement plans.

Reader Comments

Frank

January 15, 2009 3:31 PM

Then there are the rumers that the federal government is planning to confiscate (steal) everyone's 401K and IRA money to fund the social security system.

Clyde

January 15, 2009 4:15 PM

After being in the 401k investment market for 30+ years and seeing it all blown away (40+%) by Wall Street corruption along with Freddie and Fannie give aways, I think putting it into a mattress would have produce a better outcome. Will I ever trust the market again? If I do, it will be a long time coming. I would never have thought in a hundred years what has happened, would have occurred the way it did. The market in the future may never be worthy of our trust for many years, due to the distrust of those who abused your trust and your money.

tilly

January 15, 2009 4:18 PM

Give me one good reason for trusting Wall Street with my money.

Mark

January 15, 2009 8:54 PM

If you want to see just how corrupt our financial markets are, go to http://www.deepcapture.com/ .

The people who run the stock and bond trading system have been creating counterfeit shares and dumping them on the market, to manipulate the price of stocks, and the SEC has been looking the other way, just like with the Madoff scam.

Only, this scam involves about $50 trillion of lost value, instead of Madoff's $50 billion.

Basically, unless you own your stock in certificate form, there is no guarantee you actually own the stock you paid for. It's all fakery and scamming, from the mass printing of worthless dollars, to the mass electronic printing of fake shares.

Richard Broberg

January 15, 2009 9:37 PM

With tax rates going up with the liberals in control, it is probably cheaper to take the penalty now than to pay the increased taxes when you do retire.
I am taking withdrawls to buy silver and gold. They will hold their value better than the dollar when the Feds start cutting down every tree in sight to print dollars.

Clay

January 15, 2009 9:52 PM

401Ks are a pyramid scheme just like the others (Social Security, etc). Think about it. A scheme is hatched in the 1980s for people to blindly send 10% of their salary off to some broker on Wall Street - and HR says its the right thing to do because the IRS gives you a take break. What a crock. They saw that pensions were a ponzi sheme just like social security, and tried to off-load that problem to the private sector. Wall Street was more than willing to oblige, 'cause they got a cut. now, all the money is gone, and the corruption marches on ...

Dean Fink

January 15, 2009 11:14 PM

If you think losing 40% in the last year due to the subprime mortgage crisis is too much, consider the following: The subprime crisis is underway (as in not-over yet). The Alt-A mortgage crisis has not started. Neither has the Option-Arm mortgage crisis. The subprime mortgages and the Alt-A mortgages each totalled about a trillion dollars worth. The Option-Arm mortgages total about 650 billion. After 9/11 my 401K dropped about 40%, it went back up and now has dropped again about 40%. Twice in 10 years. And there is no telling what will happen when the rest of the mortgage defaults happen.

Cosmo

January 16, 2009 12:15 AM

Charles Keating and the S&L failures, Enron book cookers, Bernie Ebbers and his MCI-Worldcom lawyers rape what was the world's best, largest and most secure data communications network and then robs it's own investors. Vodaphone convicted of selling customer's identities to thieves. Cadbury selling chocolate made in China with melamine.

The banks figured it was about time to step it up a notch and just commit extortion to have taxpayers give them $700 Billion for some monopoly money so they can become true Robber Barons.

Gee Wally, I wonder why the equities markets are sinking like a rock?

jimbo

January 16, 2009 12:27 AM

i have withdrawn all of my retirement money 2 years ago. i am satisfied that the wall street...holes will not be getting any more fees from me. i hope that they are forced to get real jobs. gold and silver are my new money.

bushdepression

January 16, 2009 12:46 AM

That money isn't going to be there when you retire...What do you think the dollars then will buy? $25 for burger and fries... Take your money out now while you still can (before withdrawals are restricted) pay the taxes, and stash the funds under a mattress and build hope...

james bond

January 16, 2009 8:32 AM

I recently stopped my contributions to my 401k, not because of the market losses ( I've only lost a couple of percent- thanks to market timing), but I don't want to see my hard earned money stolen by obama bin laden and the republicans. I am thinking very seriously about taking a tax-beating and withdrawing the entire amount.

Mike

January 16, 2009 9:27 AM

Gold and cash again out performed the S&P 500. Do not trust the Wall Street crooks anymore with your hard earned money.

Mad Max2

January 16, 2009 9:37 AM

Speaking of corruption, why would anyone buy shares in light of naked short selling? (ref: Patrick Byrne, overstockdotcom, or Bud Burrell)

Glenn

January 16, 2009 3:45 PM

If you have a long enough time horizon you should still stick it out in the markets. for those people it is premature and costly to take early withdrawals. Glenn from FAPTurboCharged.com

Chris

January 16, 2009 6:08 PM

We've got some serious problems in this country. I don't think I can leave my money with wall street greedy thugs. Is Madoff the only guy out there, no way. As long as I have Gold and Silver, maybe I can invest in real estate in 5 or 10 years when it bottoms. I'm only investing in real assets, not some fake printed paper for certificates held by some broker. Things are changing is this country and there not for the good, no matter how much paper money obama prints!

Tony

January 17, 2009 1:31 PM

In the long term the dollar is doomed, the only safe haven is gold or silver or stocks in the mining companies that produce them. Here's a link to a 20 part series called the 'Crash Course' that explains it all, the fiat money, the great expansion from the oil age, Peak Oil and how it all comes together at the 'end', we are in the last chapter of the life of the dollar.

This series is a great time saver, it covers many topics in a easy to understand way and brings it all together so you can see and understand the end result, highly recommended.

http://www.chrismartenson.com

Tony

Mike Alfred

January 21, 2009 6:53 PM

Employees are spooked by the big negatives on their 401k statements -- and many are skipping contributions, worrying that their employer will discontinue matching, or pondering a 401k loan to payoff debt. At this crucial time, individual workers need to have some sense of how their company's retirement plan stacks up in the broader marketplace. Employees deserve to know that performance differences between 401k plans from company to company can be huge and can significantly impact their long term financial security and retirement. In fact, the decisions a company makes in selecting and designing a 401k plan -- such as default investment options, company match, fees, and enrollment eligibility -- are usually more critical to an individual employee's 401k performance and retirement savings than the choices that employee makes when they invest in the plan. There is a great need for 401k performance transparency. Armed with increased knowledge, plan participants can proactively influence their company to protect their long term financial security.


Mike Alfred
CEO
BrightScope
www.brightscope.com

Mike Alfred

January 21, 2009 6:55 PM

Employees are spooked by the big negatives on their 401k statements -- and many are skipping contributions, worrying that their employer will discontinue matching, or pondering a 401k loan to payoff debt. At this crucial time, individual workers need to have some sense of how their company's retirement plan stacks up in the broader marketplace. Employees deserve to know that performance differences between 401k plans from company to company can be huge and can significantly impact their long term financial security and retirement. In fact, the decisions a company makes in selecting and designing a 401k plan --such as default investment options, company match, fees, and enrollment eligibility -- are usually more critical to an individual employee's 401k performance and retirement savings than the choices that employee makes when they invest in the plan. There is a great need for 401k performance transparency. Armed with increased knowledge, plan participants can proactively influence their company to protect their long term financial security.

Mike Alfred
CEO
BrightScope

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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