Approximately 52% of respondents admit to tapping their retirement savings account early for a purpose other than retiring, according to a survey by MagnifyMoney. The Investment Company Institute’s (ICI’s) larger database shows around 1% of participants taking withdrawals quarterly and around 15% taking loans quarterly. The percentage can be higher or lower depending on the quarter.
No matter what percentage are withdrawing money through their retirement savings it is likely for the reasons MagnifyMoney found. The two main reasons respondents cited for withdrawing money from their retirement savings are home ownership and personal debt. According to the survey, 23% of those making an early withdrawal did so to help pay down non-medical debt, while 17% needed the money for a down payment on a home.
Likewise, Fidelity data shows debt and homeownership are driving participants to withdraw funds. A 2016 Fidelity participant panel survey found 31% of participants use loans for paying down/paying off high-interest credit card debt, 24% for home improvement or repairs, 21% to buy a home or refinance a mortgage and 19% to pay outstanding bills.
According to MagnifyMoney, older savers are less likely to withdraw money from their retirement plans than younger savers. Fifty-four percent of Millennial savers say they’ve taken an early withdrawal from a retirement savings account, compared with 50% of Gen Xers and 43% of Baby Boomers. “This stands to reason considering that many Millennials have now entered the stage of life where they are getting mortgages, starting families and taking on bigger financial obligations while also being decades away from the traditional retirement age,” MagnifyMoney says.
Millennials are also more likely to say that raiding their retirement savings is justified under certain circumstances, at 39%. One-quarter (26%) of Gen Xers and 17% of Baby Boomers say the same.