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New Study Shows That 1 In 4 Americans Will Tap Retirement Plans For Non-Retirement Needs

Cash-Outs, Loans, and Heavy Fees Take Heavy Toll on Nation’s Premier Retirement Savings Program

WASHINGTON, Jan. 16, 2013, New research released today by HelloWallet finds that over 25% of U.S. workers participating in a 401(k) plan will access their 401(k) savings before they reach retirement, now withdrawing $70 billion annually. The study, which analyzed consumer finance data from the Federal Reserve and the U.S. Census Bureau, raises significant questions about the future of the bedrock retirement program as more workers move from traditional pension benefits towards tax-incented defined contribution programs. The survey results also hold significant implications for employers, who collectively invest $118 billion annually in 401(k) programs for their workers’ retirement.

The research finds that one out of four participants in 401(k) retirement programs will either cash-out their savings before retirement – incurring substantial penalties and taxes – or forfeit them to loans. Among the other findings in the research:

 

  • 26 percent of 401(k) participants now use their 401(k) savings for non-retirement needs;
  • 75 percent report that they breached their savings because of basic money management problems;
  • Workers now withdraw or breach over $70 billion annually out of their 401(k)s for non-retirement needs;
  • Penalized withdrawals increased from $36 billion to about $60 billion between 2004 and 2010;
  • Workers in their 40’s are most likely to breach their savings for non-retirement needs.

“This research shows that employers are not getting the ROI that they may think they are from their retirement investments,” said HelloWallet founder and CEO Matt Fellowes , a former Brookings Scholar who led the study. “Investing in retirement savings is essential for all Americans, but this study demonstrates that a large share of U.S. workers lack the basic financial skills needed to actually benefit from those savings, and it’s costing both them and their employer dearly.”

“While there is no question about the need for retirement savings, the issue raised by our research is whether employees are given the financial tools, including unbiased guidance, to make the best decisions every step of the way,” said Fellowes. “These data strongly indicate that, for many workers, investment advice is misaligned with their investment needs and, as importantly, with their basic day-to-day financial needs.”

The research also finds that only a small percentage of employees (8 percent) are withdrawing funds because they have lost their jobs. Instead, 75 percent of those who have made early withdrawals have done so because they lack basic money management skills and need to meet basic money management challenges, such as emergencies, credit card payments, and health care. In many cases, better planning and guidance would put them on a track to avoid costly mistakes, take advantage of the tax incentives, and accumulate the savings needed for retirement.

For employers, the implications of the research are substantial. American companies now spend $118 billion annually on retirement contributions with the expectation that employees will take maximum advantage of these programs to improve their financial well-being. The new research suggests that employers’ massive investment is not always delivering the intended results.

To aid employers in evaluating the effectiveness of their retirement and other Rewards programs, HelloWallet is providing an online diagnostic. Called the “Financial Wellness Diagnostic,” this free tool provides employers with insight into the needs of their workforce to help them better align their benefits investments to meet that need.

To receive a complete copy of the study, click here.

About HelloWallet. HelloWallet is the leading provider of behavioral technology applications that help organizations improve their performance through aligning their Total Rewards spending with their human capital needs. HelloWallet is headquartered in Washington DC and is backed by Morningstar, Inc., TD Fund, Grotech Ventures, and Revolution LLC. For more information, please visit our website www.hellowallet.com or call 866.55.HELLO.

Contact:
Don Goldberg
don@bluetext.com
202-365-5224

SOURCE: HelloWallet

RELATED LINKS: http://www.hellowallet.com

 

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Contractor Mistakes

NEW YORK, Jan. 11, 2013, Your Contractor Did What?! 4 Ways to Make Sure Your Home Renovations Aren’t a Disaster

 

According to the experts on RealtyPin.com, the right home renovations can make or break the time you spend in your home. They can also make or break the time it takes to sell your home. However, you can’t end up with the right finished product unless you hire the right contractor. That means you’ve got to avoid these major mistakes:

Grading the 2012 Housing Market

1. Picking a contractor based on price
Yes, I know you want to save some money, but the last thing you should want is for your home to look like a corner-cutting haven. It’s one thing to get a good deal. However, a contractor that offers prices that are too good to be true usually does so for a reason – and it’s not a good one. Think about it – if your contractor is offering you a price that’s far less than what everyone else is offering, why? How is he going to make up the difference? By using lower-quality materials? Doing the work faster and, thus, upping the chances of making sloppy mistakes?

Renovation advice: The Top 4 Things Experience Can Teach You in a Home Renovation

2. Not checking to see if your contractor is insured
Most homeowners assume that because their contractor “looks” professional, he must be insured. Boy, is that a risky game! If your contractor isn’t insured and something goes wrong (like if one of the employees gets injured while working on your project), you could be liable for it. Do you want to risk being sued because you didn’t think to ask if your contractor was insured before the work began? I didn’t think so!

Renovation tips: Why “Invisible Renovations” Aren’t Good Enough

3. Not getting a written contract
A good contractor will put everything in writing – including a detailed description of your entire project, approximate completion dates, a payment schedule, and even a list of materials (especially if it’s high-end stuff). That way, there will be no confusion along the way and no risk for anyone going back on their word.

Browse homes for sale in: San Diego Phoenix San Antonio Dallas San Jose Miami

4. Making the final payment before the work is finished
No matter how great your contractor seems, never ever hand over the last check before the work is finished – including all of the clean-up. After all, if everything has been paid for, what incentive does your contractor have to finish the job?! In fact, when you and your contractor are drawing up your contract, make sure to specify that the final payment will not be made until everything is complete and your home is completely back to normal. That means that all inspections have been passed, all dumpsters have been removed, and everything else has been cleaned up and your home is ready to show off to the world. Otherwise, your project may never end!

Looking for a new home for sale? Visit Realtypin.com

Media Contact: James Paffrath , RealtyPin.com, 1-(866) 960-8649, james@realtypin.com

SOURCE: RealtyPin.com

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20.6 Million U.S. Homeowners Own Homes Free And Clear Of Mortgage Debt

 

Pittsburgh, Tampa and New York Top Metros For Free-And-Clear Homeownership; Age, Credit Score and Local Home Values Help Influence Ratios Of Debt-Free Homeowners

 

SEATTLE, Jan. 10, 2013 — Almost 21 million Americans, or 29.3 percent of homeowners, own their homes outright, unencumbered by a mortgage, according to a recent Zillow® analysis of mortgage data.

 

Analyzing data through the third quarter of 2012, Zillow found that 20.6 million homeowners nationwide own their homes free and clear of mortgage debt.

 

Among the nation’s 30 largest metro areas included in the study, Pittsburgh (38.6 percent), Tampa (33.2 percent), New York (29.7 percent), Cleveland (29.4 percent) and Miami (28.9 percent) had the highest percentage of free-and-clear homeowners. Washington, D.C. (15.5 percent), Atlanta (17.7 percent), Las Vegas (18.3 percent), Denver (18.5 percent) and Charlotte (20 percent) had the lowest percentage.

 

A number of elements influence the percentage of free-and-clear homeowners in a given area, including median home values. Zillow found that areas with lower home values generally have higher outright homeownership rates, as smaller loan amounts are easier to pay back more quickly.

 

Demographic factors including the age and credit rating of primary borrowers also influence free-and-clear homeownership rates. Zillow found that 65- to 74-year-olds are most likely to be free-and-clear (20.5 percent), followed by 74- to 84-year-olds (17.9 percent). This is attributed to the fact that the longer someone owns a home, the longer they have to pay off their mortgage. Interestingly, when examining free-and-clear ownership rates as a percentage of homeowners in various age groups, Zillow found 34.5 percent of 20- to 24-year-old homeowners are free of mortgages.

 

Among homeowners who own their homes outright, 44 percent have a high VantageScore – representing their credit rating – between 800 and 900. Only 15.5 percent of homeowners with the highest credit rating of 900-990 are free-and-clear.

 

“So far we have used our unique data on how much homeowners owe on their homes primarily to identify underwater and delinquent groups of homeowners,” said Zillow Chief Economist Dr. Stan Humphries . “But looking at those homeowners who are free-and-clear is important, too. Homeowners unencumbered by a mortgage may be more flexible than indebted homeowners, and therefore more apt or willing to list their homes or enter the market for a new property. By determining where these homeowners are located, we can also gain insight into potential inventory and demand in those areas, as well.”

 

Zillow’s analysis incorporates mortgage data from TransUnion®, a global leader in credit and information management. All personally identifying information is removed from the data by TransUnion before delivery to Zillow. Overall, the data covers more than 800 metro areas, 2,100 counties and 21,900 ZIP codes nationwide. To calculate the free-and-clear homeownership rate, we compute the number of overall homeowners and number of homeowners with no outstanding mortgage debt by location and demographics. We exclude investor and rental homes.

METRO

FREE-&-CLEAR
HOMEOWNERSHIP RATE

METRO

FREE-&-CLEAR
HOMEOWNERSHIP RATE

New York

29.7%

San Diego

21.5%

Los Angeles

20.7%

Tampa

33.2%

Chicago

23.8%

St. Louis

27.2%

Dallas-Fort Worth

24.5%

Baltimore

22.5%

Philadelphia

27.6%

Denver

18.5%

Washington, DC

15.5%

Pittsburgh

38.6%

Miami-Fort   Lauderdale

28.9%

Portland

21.8%

Atlanta

17.7%

Sacramento

21.5%

Boston

24.6%

Orlando

24.6%

San Francisco

21.8%

Cincinnati

23.7%

Detroit

28.8%

Cleveland

29.4%

Riverside, Calif.

20.6%

Las Vegas

18.3%

Phoenix

22.9%

San Jose, Calif.

22.1%

Seattle

21.0%

Columbus, Ohio

21.7%

Minneapolis-St   Paul

20.6%

Charlotte, NC

20.0%

For more data on free-and-clear homeownership, including data at the state, metro and county levels broken down by homeowners’ age and credit rating, please see the full research brief or contact press@zillow.com.

 

About Zillow:
Zillow (NASDAQ: Z) is the leading real estate information marketplace, providing vital information about homes, real estate listings and mortgages through its website and mobile applications, enabling homeowners, buyers, sellers and renters to connect with real estate and mortgage professionals best suited to meet their needs. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Stan Humphries. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 350 markets at Zillow Real Estate Research. Zillow, Inc. operates Zillow.com®, Zillow Mortgage Marketplace, Zillow Rentals, Zillow Mobile, Postlets®, Diverse Solutions®, Buyfolio™, Mortech™ and HotPads™. The company is headquartered in Seattle.

 

Zillow.com, Zillow, Postlets and Diverse Solutions are registered trademarks of Zillow, Inc. Buyfolio, Mortech and HotPads are trademarks of Zillow, Inc.

 

TransUnion is a registered trademark of Trans Union , LLC.

 

SOURCE Zillow

RELATED LINKS
http://www.zillow.com

 

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We have created a new finance list on Twitter. Please feel free to subscribe at the link above.  This is a comprehensive list of the most popular Twitter members who tweet about finance.  Enjoy!

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Welcome to Learn About Finance, the premier online website providing information about the science of finance!  There are many misconceptions of what finance is and its relationship to other related subjects, such as economics.  Learn About Finance will help to eliminate these misconceptions and provide a foundation for anyone interested in learning about this field.

Please feel free to post comments or participate in any discussions found within this website. Thanks for visiting Learn About Finance!

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