Why Your 401(k) Still Hasn't Recovered

Retirement account balances are still below their 2007 peaks.


401(k) expenses. Retirement savers continue to pay fees on their retirement investments, even in years in which they lose value. Investment and record-keeping fees are paid by most 401(k) participants. There are also redemption fees or surrender charges imposed for changing and selling investments.

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Early withdrawals. Financial hardship caused some workers to dip into their retirement accounts early. Employees are generally allowed to take a 401(k) loan of up to 50 percent of the vested account balance or $50,000—whichever is less. But the loan must be paid back with interest. Some 18 percent of Vanguard 401(k) participants had a loan outstanding at the end of 2009. Another 2 percent of 401(k) participants took hardship withdrawals. Workers who take 401(k) withdrawals before age 59 1/2 must pay a 10 percent early withdrawal penalty and regular income tax on the amount withdrawn. 401(k) participants are often not allowed to contribute to their 401(k) again for six months after a hardship withdrawal, which makes replacing the savings even more difficult.