December 15, 2015
401(k)s Tapped for Holiday Gifts
Many Americans have poor habits around saving for retirement, but tapping a 401(k) to buy holiday gifts seems beyond the pale.
Yet that’s precisely what some people do. In a new T. Rowe Price survey of 1,000 adults, 7 percent said they have spent some retirement savings on “holiday spending.” Surprisingly, men are more likely to do so than women, who, the survey indicates, are better at planning ahead for the holiday shopping season.
The survey doesn’t specify whether this spending is on gifts or a sleigh ride to grandma’s house, but it doesn’t really matter. When the commercial pressures of Christmas start eating into long-term saving for retirement, it seems to confirm that it’s too easy to withdraw money from 401(k)s, as a recent study by the Center for Retirement Research concluded.
If tapping into your 401(k) to buy gifts has crossed your mind, don’t do it: these seemingly “small” amounts add up. In total, pre-retirement withdrawals from retirement plans deplete roughly one-fourth of a typical U.S. worker’s account balance over a lifetime, according to the Center, which supports this blog. The most common withdrawals occur when workers change jobs, followed by withdrawals to ease financial hardships.