A rise in hardship withdrawals
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STEVE CHIOTAKIS: Right now we're gonna ask this morning's big question, and it has to do with money people are saving for their retirement. A new report out today says more Americans are dipping into their 401(K)s and other similar funds. Fidelity Investments says a higher percentage of people are taking out loans from those plans. That number, at a 10-year high. And a record number of people with those investments made so-called hardship withdrawals.
Jill Schlesinger is editor-at-large at CBS MoneyWatch. She's with us live from New York. Good morning, Jill.
JILL SCHLESINGER: Good morning.
CHIOTAKIS: Why would someone make this sort of decision? What's a hardship?
SCHLESINGER: Well, I'll tell you, the bar is very high. The IRS says that you have to demonstrate immediate and heavy financial need, and the amount you take out has to satisfy that financial need. It can be medical expenses, costs relating to the purchase of a principal residence, tuition or education fees. And here's the big one I think -- payments necessary to prevent eviction from or foreclosure on a principal residence. You know, in the second quarter of the year, 62,000 people initiated hardship withdrawals compared to 45,000 a year ago.
CHIOTAKIS: Wait a second -- we were worse off last year, right, economically. So why is that number going up?
SCHLESINGER: It is worrisome. I don't think surprising. Just think about it. We have 6.5 million Americans who have been unemployed for more than six month, 8.5 million who are working part time. We've got this group who we call the 99ers -- those unemployed workers who have exhausted their unemployment benefits. This is why probably that -- according to Fidelity -- 45 percent of participants who took withdrawals a year ago took another one this year.
CHIOTAKIS: A second one. Wow.
SCHLESINGER: A second one.
CHIOTAKIS: So the big question, then, Jill -- How does the economic recovery spread to everyone? Apparently some people with a job are feeling the recovery, but not everyone has a job.
SCHLESINGER: Yeah, I think this is really a tale of two recoveries. If you have a job, and you have some assets, your assets have gone up because the stock market's up 60 percent, your house has probably gone up from the bottom and you're seeing some income growth. But then we have that huge pool of people who are either unemployed or under-employed. And I hate to sound like a broken record, but it all goes back to job creation. I don't think until we see more thorough job creation across all job sectors in this economy are we going to see a recovery where all of us are going to be participating.
CHIOTAKIS: Jill Schlesinger from CBS MoneyWatch. Jill, thanks.
SCHLESINGER: Thank you.