Trent Charlton knew the risks when he borrowed $10,000 from his 401(k) and cut his retirement savings in half.
But Charlton, a 40-year-old account executive at an Irvine, Calif., trucking company, said he had little choice because he and his wife could not keep up with monthly expenses after American Express reduced the limits on three credit cards.
As home prices fall and banks tighten lending standards, more people are doing the same thing: raiding their retirement savings just to get by and spending their nest eggs to gas up SUVs, pay mortgages or put food on the table.
Sounds pretty bad. I knew the economy was slowing down, but when you have to tap your 401k, it's a bad situation all around.
But yet again, here we have an extremely bad example of a "poor me" story.
Charlton and his wife used the retirement money and $7,000 from savings to pay down their credit card debt. They also cut monthly expenses by pawning a diamond ring and selling camera equipment he owed money on. And he's looking for someone to take over his $550 monthly payment on a gray BMW 335i he leased last April.
A leased BMW?? I swear to GOD news organizations can't find a simple guy who got caught up in a bunch of things without showing example after pitiful example of people simply overstretching themselves and purchasing things they could not afford.
Not only did they making bad choices then, they are making bad choices now.
"People who take out a loan or withdrawal are adding to a looming retirement crisis over the next 30 to 40 years," said Eric Levy, a partner at global consulting firm Mercer. "And what implications will that have (for) our economy?"
That means in 20 years, we'll be hearing about how Trent now has screwed himself out of a retirement and how we should feel sorry for him yet AGAIN and bail him out.
Perfect example of his poor decision skills:
Charlton said his goal is to pay off the 401(k) loan in two years. He has not decided whether he will contribute to the plan during that time.
"I made the best decision I could," he said. "I keep hearing about bankrupting your future retirement. But I feel like it's far enough away that I'll be able to save up enough."
And what happens if you can't pay it back in 2 years Trent? You have 20 years until your retirement, you're going to need every dollar you can get with your LEASED BMW payments, because let's face it, Trent here isn't going to learn and is going to turn right around when things pick up for him and get another vehicle.
People have accused me of being cruel in these troubled times, but I simply cannot feel sorry for people who put themselves into these situations.
I get people all the time who drive into work with the latest vehicle, sporting the latest i-Whatever from Apple, and yet I get snickers and laughter when I pull into the parking lot in my civic and listen to streaming radio over the internet.
Tell me, as a taxpayer, do you think you should bail people out who aren't fiscally responsible? Do you think that you should prop up people who live out of their means and have nicer things then you do?
If so, what do you propose that we do when millions of people start doing this more and more often?
I do feel sorry for people who struggled and saved their entire lives and bought a house only to have things ripped out from underneath them. However, just like everyone else, if I bought the $600,000 6 bedroom home with a three car garage and I made poor decisions about my fiscal health, would you want to bail me out?
Even financial folks think Trent is making a big mistake:
"What we're talking about is people spending their retirement now and lowering their standard of living when they retire ... People aren't willing to make some of the tougher choices in the short-term to make a better future for themselves," said Stuart Ritter, a certified financial planner with T. Rowe Price.
"That's not a smart strategy. You don't want to apply a short-term fix to a long-term issue," he said.
But our friend Trent isn't a long term thinker:
Said Charlton: "We have to take care of ourselves now and put retirement on the back burner."
Trent, take a look behind you. You have a nice big kitchen, and I'm willing to bet that you have a nice big home. Don't screw yourself in the long run to keep up a lifestyle you simply can't afford.
Travis
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