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From CNN.

Fidelity reported that, as of the second quarter, 2.2% of all 401(k) participants had made a hardship withdrawal at some point over the preceding 12 months. That’s up from 2% in the prior year, and was the highest level in 10 years.

There are many things that you can look at that can point to strength or weakness in the economy.  This is not a good one.  If more people take more money out of the market that puts downward pressure on the market. 

At the same time, the percentage of 401(k) participants that had an outstanding loan from their account rose to a record high of 22% in the second quarter. The average loan amount was $8,650 at the end of the quarter.

That shows that many people have taken money out of their retirement.  Again, not a good sign.  So, more people may have to work longer before they retire.  It also shows that people need money today to pay their bills.

The top reasons people took loans and made withdrawals were to prevent foreclosure or eviction, pay for college, or purchase a home, according to the firm.

Good and bad here.  If home values go up then they should be able to pay the money back.  However, some of them are probably out of work.  It sure looks like the two most important things for the economy in the short run is employment and home values.

This entry was posted on Saturday, August 21st, 2010 at 8:09 AM and is filed under investing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.