Hardship withdrawals and emergency loans from 401(k) retirement accounts were on the uptick during the past few months among account holders in one of the nation's largest investment companies.
The main reasons given for the withdrawals were to prevent home foreclosure or eviction, to pay for college, or to buy a primary residence, Fidelity Investments said.
During the second quarter of this year, 62,000 participants initiated a hardship withdrawal, up nearly 38 percent from the 45,000 participants who initiated one during the first quarter of the year, Fidelity said. Fidelity has 11 million investors altogether.
"It's not a crazy spike, but the numbers have been slightly trending up for the last few quarters," said Michael Shamrell, a spokesman for Fidelity, based in Boston.
Bellmore resident Kenneth Eisenman, 47, has not yet taken a hardship withdrawal, but he said he is on the verge of doing so if he doesn't get a job in the coming months. Laid off in April from a bank operations trade support position, he said he hasn't lived extravagantly but is "down to the bare bones on savings."
He doesn't like the idea of tapping retirement savings, but it's a matter of survival, he said. "I'm not going to make it to retirement if I don't survive now."
Executives at The Alcott Group, a human resources firm in Farmingdale, said they, too, have seen an increase this year in loans and hardship withdrawals from the 401(k) fund they administer for about 250 employers.
The main reasons employees have given, said Jeanne Anderson, operations manager: to pay medical bills, to prevent foreclose on a mortgage, or prevent eviction from a home.
In the past three months or so especially, the firm has also seen people reduce contributions to their retirement savings, or pull back on contributing altogether, said Barry Shorten, executive vice president and co-founder. "It's all about cash," he said. "People need the money."
Fidelity reported Friday that as of the second quarter, 2.2 percent of active participants took a hardship withdrawal, up from 2.0 percent a year ago.
A similar trend was spotted last year by Illinois-based Hewitt Associates, which said that during 2009, 7.1 percent of participants took a withdrawal, slightly higher than the 5.9 percent in 2008. Of these, 20 percent were hardship withdrawals.
Fidelity officials said that for some participants, taking retirement money out early may be their only option because they have no other savings. But, officials said, it's important to remember the income tax penalties and long-term reductions in payouts.
That was very much on Jennifer Friedrich's mind last month when she opted for a loan from her 401(k), as opposed to looking into a hardship withdrawal, which would have required her to pay tax and a 10 percent penalty. Friedrich, 30, of Manorville, said she has a good job as an administrative assistant, but "everything has gone up in price. It costs almost 20-30 percent of my income for child care alone."
The cost of health insurance is rising, plus summer, with the high cost of camp, is particularly challenging for this divorced mother of two. "The loan is just fine now to get me by."