July 23, 2012

Some laid-off South Floridians are going to social service agencies, complaining they have raided savings and retirement accounts just to stay afloat – a trend seen nationally.

Almost two thirds of laid-off workers who had a 401(k) retirement account at their last employer withdrew money to pay bills, according to a nationwide survey by the nonprofit Transamerica Center for Retirement Studies.

The survey found middle-aged displaced workers are at the greatest risk because of their low amount of retirement savings. Those in their 40s and 50s had only an estimated median retirement savings of $2,300 left in their 401k accounts, according to the survey. The average 401k balance is $71,500, up from about $50,000 when the stock market tanked in 2008 during the onset of the Great Recession, according to Fidelity, one of the largest 401k providers.

South Florida social workers say they have had to teach many of the jobless how to apply for food stamps and obtain other services after they have exhausted savings while trying to find new work. The job search can take months – if not years. There are more than 5 million long-term unemployed in the United States who have been looking for work for 27 weeks or more.

"We're hearing more people say: 'We have nothing left,'" said Patrice Schroeder of 211 Palm Beach/Treasure Coast.

In Hollywood, Harry Nash said he had depleted his 401k account – going through about $20,000 – after he lost his job in 2010. "Every dime of it," said Nash, 65.

He said he had struggled to pay bills, including child support, while he was laid off. Nash said he was down to a quarter tank of gas in his car when he found similar work as a counselor at a nonprofit. Now he's having to play catch up on past due bills.

Retirement is not an option, Nash added, since his Social Security check wouldn't pay his rent.

He's not alone.

"We have had this epidemic of middle-class people slipping into poverty – it's terrible," said Joyce Curtis, executive director of the nonprofit Jubilee Center of South Broward, which operates a soup kitchen and food pantry and helps people apply for food stamps.

Overall, 63 percent of those who lost their jobs said they had to dip into their retirement savings to cover expenses, according to the survey.

The workers said they had no choice, even though many had to pay penalties and all had to pay taxes on the withdrawals from their 401k savings, the study found.

This may affect their eventual retirement with more Americans having to work years longer before they finally are able to quit their jobs, said Catherine Collinson, president of the Transamerica Center for Retirement Studies.

"It be difficult for them to overcome these savings setbacks once they regain employment," said Collinson, who recommended workers put extra money into retirement accounts when they do get new jobs.

Many of the middle-aged displaced workers were perhaps caught off guard as they were helping their children or elderly parents, added Collinson.

Now, she added, "older workers have less time to catch up."

But it's important that they hold on to their 401k and IRA retirement accounts, which are protected from creditors if people have to declare bankruptcy, said Collinson.