Hendricks County Flyer, Avon, IN

January 25, 2013

Americans are raiding their 401K accounts

By Taylor Armerding

— There was a clear undercurrent of alarm when a Washington Post story reported that more than a quarter of American workers with 401(k) and other retirement savings accounts were using them to pay for current expenses.

This is draining nearly a quarter of the $293 billion deposited into those accounts every year.

Matt Fellowes, a former researcher for the liberal-leaning Brookings Institution and now chief executive of the financial advisory firm HelloWallet, told the Post that employers who match their workers' contributions, "are dramatically overpaying for retirement, but it is not benefiting the employee."

To which I wonder, why is anybody, especially the left-leaning Post and other liberals, surprised?

I agree that, back in those long-ago days when personal responsibility was considered important, this would have been seen as a very big problem. But now? The ones raiding their retirement accounts are the smart ones. You can count the ways.

First, why shouldn't they spend it? At least they're spending, or borrowing against, money they actually have, unlike our benevolent federal government, which is spending trillions that it doesn't have - borrowing it from China and leaving crippling debt for the coming generations to clean up.

Time and again in his first term, and now going into his second, President Obama has declared that true fiscal responsibility lies basically in just getting a bigger limit on your credit card.

His recent self-righteous declarations on raising the debt ceiling (which he spoke and voted against as a senator) are just the latest absurdity.

Obama slams Republicans for resisting raising the debt ceiling, saying that the U.S. has always been a nation that pays its bills.

That's worth a "Saturday Night Live" skit - which will never happen since SNL wouldn't consider mocking a president not named Bush. And even if they did so, no matter how SNL framed it, they would be accused of using "racist dog whistles."

But the fact is that under Obama, the U.S. has done everything but pay its bills. It gets other countries to pay them, with a "promise" to pay them back.

The people tapping their retirement funds are just following the government's example. No need for delayed gratification. No need for restraint. No need to plan for the future. No need to spend only what you can afford.

If you want it now, you spend it now, and if you do go broke sometime later, demand that somebody else support you.

Indeed, that is the second reason that any half-aware American should spend their money now. If you save it, the government will come looking for it.

I recall listening to a radio talk show several years ago on the topic of saving for retirement. The expert being interviewed went through all the reasons that people should set aside some money every month for their retirement years.

But when she was asked what would happen to those people who ignored that advice, who didn't save, and who ended up relatively broke in retirement, she said, "Well, I think those who are more fortunate will have to be asked to help them out."

Got that? If you sacrifice and save now, you will get no credit for it, or for how hard you may have worked. You will simply be labeled "more fortunate," as if the money you saved just fell out of the sky and you don't really deserve it. And, as the president is so fond of saying, you will therefore be "asked" to pay more - a "request" that will actually be a demand, with the force and penalties of law behind it.

Meanwhile, if you didn't save anything, nobody will ask how you spent your money - whether you blew it on vacations, lottery tickets, and partying or not. You will be portrayed as a saintly individual faced with the "agonizing choice" of buying food or your medications for the next week.

So, those who don't tap into their 401(k) are suckers. They'll just be vilified for it.

Finally, the "blame" for ending up broke will never be placed on the individual who blew his savings, or never saved in the first place. Do you recall any criticism during the last decade of those who took out mortgages they knew they couldn't afford to pay back?

No, in that case, all the blame was on the unscrupulous lenders. The people who got themselves in over their heads were "victims."

That's the way it will be here too. The retirement fund managers, who collect legal fees for their services, will be painted as the cause of suffering for millions of elders who spent all their retirement money before their retirement.

Yes, it is true that a few people tap into their retirement money for very good reasons - catastrophic circumstances like a life-threatening illness. But those are relatively rare exceptions. Yet elected officials, hoping to make citizens ever more dependent on them, declare that they are the rule.

So, don't pay any attention to the alarmists who tell you it's big trouble to spend your retirement money now. Based on today's government incentives, you're a fool if you don't.

- Taylor Armerding is an independent columnist. Contact him at t.armerding@verizon.net.