Desperate Americans "Raiding" Retirement Accounts

As the great recession trudges on, more Americans are smashing their piggy banks and cashing in their rainy day funds in order to stay above water.

Stagnant wages are struggling to keep up with inflation, and Americans are saving less now than they were in 2007. Personal savings rates sunk to 3.5 percent in November – down from 5.1 percent the year before, according to the U.S. Commerce Department.

"When the stock market and the housing market were booming, we saw that a lot of people would take on more debt and save less. They felt the saving was being done for them," Mark Vitner, senior economist at Wells Fargo Securities told Reuters. 

"Today, the saving rate is falling out of necessity. Food and energy prices have risen and folks don't have as much money to spend on the things that they would like."

Now, instead of saving many Americans are raiding their 401(k)s...

According to a survey from consulting firm Aon Hewitt, almost one-third of respondents have taken out loans on their retirement plans. 

"People are at a loss, and they are struggling," says Pamela Hess, Hewitt's director of retirement research.

"Particularly during the economic downturn, employers and financial advisors have been increasingly vocal about the negative impact that cashing out of a 401(k) plan has on retirement savings," Hess added. "But employees don't seem to be getting the message."

Younger folks are raiding their retirement at a higher rate than baby-boomers: 

*Chart courtesy of Redwoodage.com

Perhaps more frightening are the results of a retirement confidence survey from Employee Benefit Research Institute (EBRI), which found that aging Americans are actually changing their medical prescriptions and avoiding routine doctors visits in an attempt to save money.

The same survey found 27 percent of workers feeling "not at all confident" they will be able to afford a comfortable retirement. Almost 15% expect to work until at least the age of 70, which is 10% higher than it was in 2006.

"Americans are still coming to terms with fact they're not going to earn as much income as they once thought and they are not going to have as much wealth," Vitner added.

"They are now trying to work out how they are going to have to adjust their lifestyle to fit that."

With results like these, a decent retirement lifestyle will be a tight fit for many Americans...

If you want a quick, simple look at how your retirement funds are stacking up, check out the calculator below:

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