Nearly half of exiting workers cash out of 401(k)s; Effect on finances could be devastating, NASD warns.(News)

Investment News, May, 2006

Byline: Lisa Shidler CHICAGO - When employees switch jobs, many withdraw money from 401(k) plans to pay down credit card debt or buy automobiles, rather than roll the funds into another retirement account, according to a recent study. Many financial advisers agree with the study's findings, which showed that 45% of workers cash out of their 401(k) plans when they leave a job.

The study, from Hewitt Associates LLC of Lincolnshire, Ill., prompted Washington-based NASD to send out an advisory cautioning people to think twice about cashing out of their 401(k) plans. In the advisory, NASD warned consumers that if they cash out of their 401(k) plans, it could have a devastating effect on their finances. NASD pointed out that early cash-outs...

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