Insome cases, plan rules worked against workers in requiring minimumwithdrawals that were higher than they needed. (Photo:Shutterstock)

Although as of 2017, retirement plans and IRAs in the U.S. heldnearly $17 trillion, a new Government Accounting Office reportfinds that in 2013, workers across several generations, aged 25 to55, removed money from their retirementsavings. How much? The GAO said “at least $69 billion (+/- $3.5billion).”

Obviously, that's not good news for the retirement picture inthe U.S. As a result, GAO was asked to research the number andamount of early withdrawals, and find out why people might bedraining their retirement savings prior to retirement, as well asfind ways to discourage them from doing so.

Some of the causes for early withdrawals from 401(k) plans, thereport found, were hardship withdrawals, cashouts when leaving ajob and unrepaid loan balances. Together those three reasonsaccounted for some $29.2 billion (+/- $2.8 billion).

Hardship withdrawals alone in 2013 made up about 0.5 percent(+/-0.06 percent) of the age group's total plan assets and about 8percent (+/- 0.9 percent) of their contributions.

In some cases, plan rules worked against workers in requiringminimum withdrawals that were higher than they needed.

In others, transfer of balances to a new employer and/orimmediate repayments of loans made it easier to cash out altogetherthan to transfer an account to a new job.

Some suggestions to mitigate these problems included thefollowing:

• allowing loans to roll over into an IRA
• allowing IRA loans
• making rollovers of 401(k)s easier
• replacing hardship withdrawals with hardship loans
• adding emergency savings features to 401(k)s
• changing the age at which the 10 percent withdrawal penaltyapplies

While each of these has tradeoffs for workers, there are alsopotential issues for employers, such as higher costs for planadministration. Some of the solutions could require legislation tomake them possible.

One other strategy that could help to identify how loan offsetsfrom retirement plans are handled by employers and thus help tocreate strategies to avoid retirement funds losses is to be able toidentify how plan loan features affect long-term retirementsavings.

Currently the way such data is handled makes it impossible toidentify specific effects and strategies to counteract them.