Thursday, December 18, 2008

Who's to blame?

I had to have a difficult conversation with a participant in my client's 401(k) plan the other day. He came to me wanting to withdraw some money from his retirement plan to help pay for some bills that he was behind on. I explained to him that he could not just decide to withdraw money from this type of an account just because he was behind on some bills. He said to me, "well it's my money isn't it?" I said, yes it was, but it was for his retirement, not an emergency savings account, and the rules of the plan do not allow for withdrawals or loans unless you have a true financial hardship. What plan administrators consider a financial hardship are things like paying for medical bills not covered by your insurance, college expenses for a family member, funeral expenses for a family member, a new home purchase, or the real biggie...to help prevent a bank from foreclosing on your home. He had none of these situations. In fact, he already had a loan out from a previous home purchase a year or two earlier. His problem was, as he described it, was that he was one or two months behind in bills, including his electric bill, behind on his truck payment, and he didn't want to get in further trouble. He was in a catch-22 that more and more people are finding themselves in today. Growing financial burdens due in part by not saving for a rainy day. Now for this person, it's pouring! To be sure, some of his problems are not entirely his own. He is a mechanic and his income has gone down due to the current recession we are in, because he has less work these days. He gets paid for fixing cars and when he has less customers, he makes less money. I told him that the only thing he could do was stop making contributions to his 401(k) plan until his income and debt situation improved. I'm already doing that he said. Well, you will have to find other ways to save money by cutting expenses I said. By now he was beginning to get agitated and exclaimed that nobody cares, nobody wants to help him, and it's not his fault! I told him that I was sorry for his predicament but there wasn't much I could do for him. I did feel sorry for him, but as he left the room I thought to myself, why didn't he have an emergency savings account? Why didn't he set more money aside when business was good? Why did he buy a new truck instead of a used one? How much money does he spend on non-essentials? Does he have cable TV? How much does he spend a month on his cell phone bill? How much does he spend on cigarettes? The recession is hitting home for many people these days and they can't just wait for the government to bail them out. People have to take responsibility for their actions and/or inactions. You really can't blame anyone but yourself for poor planning. Like one comedian likes to say, you can't fix stupid!

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