Many Withdrawing from Retirement Savings Cannot Pay It Back

Not only are a quarter of adults dipping into their retirement savings, but many of them cannot pay it back.

Nearly one-third of adults who have prematurely withdrawn funds from their retirement products said they cannot pay them back, and 45% said they either cannot pay back the funds or have not begun to do so, according to a recent Wall Street Journal Online/Harris Interactive Personal Finance.

Even among the highest income earners surveyed—making more than $75,000—more than one-quarter of respondents said they cannot pay back their premature withdrawals.

Those ages 45 to 54 are less likely to be able to pay back their premature withdrawals, and those ages 18 to 34 were more likely to be currently making payments.

Taking from Retirement

The survey said about one-quarter of adults who are actively planning for their retirement have prematurely withdrawn money from their retirement savings. The most common reasons for taking from retirement investment products are a family member losing a job and a down payment on a home. Respondents under the age of 35 were more likely to have withdrawn funds for mortgage payments and to pay for an event than older respondents.

Respondents with income of at least $50,000 were less likely to have prematurely withdrawn funds from their retirement savings (70% of those who are actively planning for retirement have not). Likewise, adults employed full-time feel the least pressure to withdraw funds prematurely, with nearly 70% of those actively planning for retirement never having done so.

Retirement Planning

Among the 90% of U.S. adults who plan on retiring, most contribute to their 401(k), have an individual retirement account (IRA), or invest in the market. However, nearly one-quarter said they have not yet started planning for their retirement.

College graduates make up the only segment where a majority is actively planning for retirement (65%), while over one-third of those with a high-school diploma or less, and about one-quarter with some college education, have not begun to plan for retirement. Those with the highest incomes are most active in their retirement planning, and nearly 40% of those with incomes under $35,000 have not begun to plan.

The survey said 60% of people list Social Security as a primary source of income in retirement (down from 65% last year). Respondents among the lower middle class, earning $35,000 to $49,900, are more likely to rely on Social Security compared to the total.

Forty percent list their 401(k) or employee-sponsored retirement plan, and 31% listed IRA investments as a primary source of income. Around one-third—28%—still view a pension plan as a primary source. And, almost as many people as those who rely on IRA investments said they plan on a part-time job being a primary income in retirement.

The online survey of 2,897 U.S. adults ages 18 and older was conducted by Harris Interactive between March 6 and 10 for The Wall Street Journal Online. The full survey results can be viewed here.