Young Job-Changers Are Cashing Out of 401(k) Plans
September 1, 2008
A large number of workers in their 20s and 30s are cashing out their 401(k) accounts when they switch jobs and using the money to pay down credit card and home mortgage debt, according to a new survey by Fidelity Investments.
The survey of 1,200 adults aged 20 to 40 found that 56% of workers in this group cashed out their workplace saving plans when they switched jobs. Nearly 60% didn’t believe they were making a smart financial decision and 41% said they didn’t seek financial advice when switching jobs.
The typical Generation X worker—those born between 1967 and 1975—and the typical Generation Y worker—those born between 1976 and 1987—will work for seven different employers during their career, Scott David, president of retirement services for Fidelity Investments, said in a wire report.
“If you consider the combination of the withdrawal behavior with that propensity for multiple employers, I do think we are facing a savings challenge and crisis with this generation,” he said.
Generation X and Y workers are expected to surpass baby boomers as the largest single segment of workers in the United States by 2010, according to the U.S. Bureau of Labor Statistics.
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