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Vanguard: Average Person Pulled $12,000 From 401(K) During Pandemic

Vanguard: Average Person Pulled $12,000 From 401(K) During Pandemic
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By    |   Wednesday, 11 November 2020 06:39 PM

The average American reportedly has been dipping into retirement funds to seemingly stay afloat in a financial sense amid the coronavirus pandemic.

The typical Vanguard investor pulled out $12,000, CNBC reported, citing company data.

About 4.5% of Vanguard 401(k) investors took a distribution, according to a new Vanguard analysis of its client data.

However, it equates to almost 187,000 investors, according to a CNBC analysis of Vanguard data published over the summer, which indicated that a coronavirus distribution was available to about 4.2 million 401(k) customers.

The CARES Act allows 401(k) and other retirement savers to withdraw up to $100,000 through December via a “coronavirus related distribution.”

Meanwhile, Bloomberg Opinion's Ethan Schwartz recently warned that "an expensive and antiquated 401(k) system" is eating your retirement savings.

"Our current system favors costly middlemen in ways that were perhaps necessary when 401(k)s were first established 40 years ago, but are largely superfluous today. Consider that by various estimates, the average fees levied on 401(k) savings hover in the range of 0.5% annually, with much higher costs for small employers," Schwartz wrote. "That compares to annual expenses well under 0.1%, and often near zero, offered by widely available stock and bond index funds and ETFs in many flavors and stripes outside of 401(k)s," Schwartz explained. 

"That excess cost — roughly 0.4% annually — may not sound like much. But for a worker who dutifully puts $10,000 a year for 40 years into a portfolio that earns 6% annually, the difference in final savings can be north of $150,000 — greater than 10% of the end sum," Schwartz said.

"With more than $5.5 trillion invested in 401(k) plans, cutting costs to savers by even 0.4% would add more than $20 billion annually to the nest eggs of American workers."

For his part, President Donald Trump issued a warning about retirement savings in his final debate against Democrat Joe Biden,.

“If he gets in, you will have a depression the likes of which you’ve never seen. Your 401(k)s will go to hell, and it’ll be a very very sad day for this country,” the president said.

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The average American reportedly has been dipping into retirement funds to seemingly stay afloat in a financial sense amid the coronavirus pandemic.
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Wednesday, 11 November 2020 06:39 PM
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