Many people stop contributing to their retirement plans

Posted Oct 28th 2008 2:27PM by Jonathan Berr
Filed under: TD AmeriTrade Holding (AMTD), Financial Crisis

Here is a frightening statistic: about 63% of people with retirement accounts have stopped contributing to them. That little nugget comes courtesy of a recent survey conducted for TD Ameritrade (NASDAQ: AMTD).

Half of those who stopped contributing to their retirement accounts cited "financial strain due to the economic downturn." Another 32% cited unemployment, while 25% mentioned health care costs, according to a company press release. Of those polled, 34% had less than $50,000 in investable assets.

Many of the people who've quit or curtailed contributing -- nearly one in four -- are aged 35 to 44, which should be prime earning years. I am not going to bore you with financial planning 101, but the earlier you start to save (absent a market meltdown), the better because over time the stock market is your friend. Lately, though, it has not been much of one.

Mulling over this survey got me thinking that whoever is elected president is going to face the gargantuan challenge of rebuilding the financial security of millions of Americans who are being forced to push back their retirement plans or who have mortgages they can no longer afford. It's going to take years for people to rebuild their nest eggs and undo the damage they have done to their credit by over-extending themselves. Many people may never be able to return to their former lifestyles.

Of course, that may not be such a bad thing. If this crisis has taught us anything, it's that people need to live within their means.

Tags: 401K, AMTD, featured, investing, nasdaq, nyse, REtirement planning, RetirementPlanning, stock market, StockMarket

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Reader Comments (Page 1 of 1)

10-28-2008 @ 4:10PM

ChainedLightning said...

Why rebuild anything? Just put them on the dole, easier to control that way.

Also, a lot of people are feeling betrayed by their retirement investments. You put money in them for years, only to watch them vanish into smoke in a month. Some people will realize that they will (eventually) recover, but others will pull out at the worst possible time and take huge losses.

Some of my relatives who went through the great depression still keep a lot of their money hidden in their house to this day. Wonder if many of us willbe the same.

10-28-2008 @ 3:28PM

Fed UP said...

It's always the little people who get hurt;can't blame anyone even young people for not wanting to contribute, sure every financial advisor says "save, save" to contribute to their hefty bottomline. Who is actually watching out for the average Joe- no one!!!!

1-04-2009 @ 7:51PM

lily said...

i stop contributing (even to the vfinx index fund) because i'm tired of paying annual 'management fees' and see returns negative even on my 12 year investment principal

i used to think, well it's a 403b so even if i lose 35% i'm still whole and just lose the compounding interest til i'm 59.5 but now
I can't even withdraw the money without paying the penalty....i'll have to wait til 60 to start writing of 3k a year.

i just can't wait for another madoff size scheme to unravel, that'll probaby take out the rest of the retirement plan contributors.

at least we can take solace the bush's retirement savings plan didn't enslave us to pad wallstreet's plethora of fees/services

1-09-2009 @ 3:45PM

BHarrison said...

Well, if the previous investors with Madoff who either received dividends or who totally cashed out previously, have to return the profits that they were paid years ago, THEN this undermines the faith and confidence in the investment process.

In essence, "having to return dividends" that were in good faith "legitimately earned" without knowledge of the Ponzi scheme, somewhat undermines the investment concept; this virtually makes those investors liable to the degree of their previously "earned" interests/ dividends which is a major consideration. It also "penalizes" these investors by the loss of any dividends on their investments.

This is a most difficult situation to equitibly resolve in a practical manner. The mention of "going back" over a period of six to ten years to "equitbly resolve" these matters appears to be rather extreme, and perhaps excessive. It puts the onus on the investor to verify the credibility of the funds that they invest in . . . and isn't that more the function and responsibility of the SEC and other regulatory agencies?

The only parties that are going to "profit from the resolutions of these matters will be the attorneys and the forensic accountants . . . That wouldn't be so bad if they didn't have such exorbitant fee rates. As usual, in the end, it is the investors, and the little guys who "get the shaft".

Well . . . all of this is just another INCENTIVE for NOT INVESTING in the markets.