Investors.com
President Obama's Cat-Food Future For Retirees
01/16/2013

The Obama Economy: Americans are drawing down their 401(k)s for nonretirement needs in record numbers, just as Social Security goes bust. This portends poverty for millions as the White House fiddles. Cat food, anyone? 

One out of four U.S. workers with 401(k) retirement savings accounts has been forced to cash them out or borrow from them at high costs just to stay solvent. 

The Washington Post, citing a report from financial advisory firm HelloWallet, said the withdrawals have drained $70 billion, or an astonishing near-quarter of the total $293 billion, in America's retirement accounts "undermining already shaky retirement security for millions of Americans." 

It comes at a bad time, because as Monday's Page 1 IBD story by Jed Graham warned, as of this year, new retirees will outlive Social Security's official trust fund, a bankruptcy that will force a 25% cut in benefits. 

Some 69% of retired workers already are dependent in "major" part on Social Security as their main retirement income, according to a 2012 study by the Employee Benefit Research Institute, with worker savings off sharply for those in the below-$35,000 income bracket. 

Why is this happening? It's tempting to blame workers financial incompetence for these early cashouts, as some of the Post's quoted experts do. But harder evidence points to Obama's economic policies. 

For one thing, jobs remain scarce. 

A tax penalty for withdrawals as high as 45% suggests workers are most likely to be cashing out from necessity, not irresponsibility. The withdrawals coincide with a sharp rise in workers taking early retirement or going on disability simply because they can't find jobs and their unemployment benefits have run out. 

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