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April 25, 2011 at 11:08 AM
Almost one-fifth of full-time workers have dipped into their retirement accounts to cover a financial emergency in the past 12 months. A survey released Monday by Bankrate found 19% of Americans and 17% of full-time workers borrowed from their retirement savings.
The report noted that while almost three-quarters of respondents did not turn to retirement savings to pay for an emergency, the problem may be that those who do feel there is no other option.
"People are turning to this as a last resort; they have exhausted their other resources," Greg McBride, CFA, senior financial analyst at Bankrate.com, said in a statement. "At that point there is very little in the way of alternatives."
"In the short term, you might get 70 cents on the dollar by the time you figure in the taxes and early withdrawal penalty," McBride said. "Not only have you depleted your nest egg but this deals a permanent setback to your long-term retirement security, because there is no way to go back and replace those savings later. You don't get higher contribution limits to make up for the early withdrawals you've taken."
