By Liz Weston | NerdWallet

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Many companies try to help their workers to save for retirement. Employers often offer 401(k)s, company matches and automatic enrollment to encourage saving.

Much of that effort goes to waste, though, when employees leave. A study published last year in Marketing Science, a peer-reviewed research journal, found more than 40% of departing workers cashed out at least part of their 401(k)s, and most of those drained every dime.

What’s more, employers may bear at least some of the blame, according to researchers Yanwen Wang of the University of British Columbia, Muxin Zhai of Texas State University and John Lynch Jr. of the University of Colorado.

The study, titled “Cashing Out Retirement Savings at Job Separation,” suggests generous company matches can make cashing out more tempting.

Cash-outs drain future retirement security

The researchers examined records of 162,360 employees who left jobs at 28 employers between 2014 and 2016. Of the 41.4% who cashed out retirement savings, about 64% took all the money out in one transaction, while 21% emptied their accounts with two or more withdrawals.

The people who took money out had smaller balances — $15,271 on average — compared with those who left their accounts in the employer plan ($69,546) or who rolled their savings into an IRA or a new employer plan ($67,353).

The damage from any 401(k) withdrawal is significant, however. Cash-outs trigger taxes and penalties that often equal 30% or more of the withdrawal, plus the loss of future tax-deferred compounded returns. Every $1,000 withdrawn at age 35 can mean about $8,000 less in retirement funds at age 65, assuming 7% average annual returns. So a $15,000 withdrawal could mean $120,000 less at retirement age. (The younger you are, the greater the damage; the same $15,000 withdrawal at age 25 could mean $240,000 less at retirement.)

Cashing out once is bad enough, but multiple job changes could lead to workers repeatedly draining their accounts, Wang says. The median job tenure, or time employees typically remain with an employer, is about five years, according to the Employee Benefit Research Institute. That can give workers many opportunities over a working lifetime to raid their retirement savings.

“Ultimately, you might be only left with the very last pile of money you accumulated from your job,” Wang says.

Necessity doesn’t drive most retirement plan cash-outs

Sometimes a premature withdrawal is the best of bad options. People may have pressing expenses and no other savings.

But relatively few workers cash out savings while they’re working, whether through hardship withdrawals or 401(k) loans that aren’t paid back, Wang says. And previous research shows that most people who cash out when they leave a job don’t need the money for emergencies or other pressing expenses, she says.

Wang’s team hypothesized that the composition of account balances might help explain why people cash out. Thanks to a behavioral quirk known as mental accounting, people tend to treat different pots of money differently, depending on the source. So we may be more likely to spend a $20 bill found on the street versus one that we earned on our own.

The researchers wondered if something similar happens when more of an account balance comes from employer matches versus employee contributions. Would people be more likely to see their 401(k) money as a windfall to be tapped rather than a resource to be protected? The researchers found that yes, bigger matches did influence cash-outs: A 50% increase in a company match raised the probability of a cash-out by 6.3%.

That’s not the only way our mental biases get us in trouble, Wang says. When people leave jobs, they’re typically told their retirement plan options — leave the money in the plan, roll it into an IRA or a new employer’s plan, or cash out. Often, though, they’re not given much guidance about the best course to take. Simply mentioning the cash-out option may make people more likely to see the money as a windfall, Wang says. Plus, cashing out may seem like the easiest course if people aren’t warned about the cumulative impact of withdrawing retirement money and aren’t sure whether or how to roll the money over.

How employers can counteract the temptation to cash out

The answer to reducing 401(k) “leakage” isn’t to discourage rich company matches but to encourage employers to understand and counteract the temptation to cash out, Wang says. Companies could provide financial education to departing employees, explaining the long-term impact of withdrawing retirement money prematurely.

“If they really care about their employees, they should provide more information,” she says.

Another option could be for the employer to offer separate emergency savings accounts in addition to retirement plans. That would give departing workers a source of funds to tap without penalty if they needed money. Having distinct accounts labeled for different purposes — “emergencies” versus “retirement” — could help people view their retirement savings as a resource for the future rather than a windfall to be spent today, Wang says.

This article was written by NerdWallet and was originally published by The Associated Press.

 

The article Does a 401(k) Employer Match Tempt You to Cash Out? originally appeared on NerdWallet.

Voters on Tuesday morning headed to the polls, where races for city council and school board were being decided in St. Paul and throughout the east metro. The off-year election ballots also feature a question about raising sales taxes in St. Paul to pay for roads and parks, a $175 million bond referendum for school construction and safety improvements in the Stillwater Area School District, and other key property tax levies throughout the suburbs.

By the end of day Monday, nearly 5,000 St. Paul residents had already voted early by returning absentee ballots to Ramsey County Elections.

There were especially strong showings in Ward 3, which spans Highland Park, Mac-Groveland and part of West Seventh Street, followed by Ward 1, which spans Frogtown, Summit-University and swathes of the North End and surrounding neighborhoods. Open seats on the St. Paul City Council in both those races have drawn a sizable and racially-diverse mix of candidates, energizing corners of the Black, Hmong and East African electorate.

The St. Paul mayor’s office is backing a proposal to increase the city’s sales tax by a percentage point to 9.875%, which would be the highest sales tax in the state, to raise nearly $1 billion over 20 years for some 24 arterial road reconstructions, as well as high-priority park maintenance and four designated parks projects.

Potholes, taxes

Fed up with driving over potholes, Sarah Cooke went to the polls and cast a “yes” vote.

“I live on this side of town and we need better streets,” said Cooke, a longtime homeowner in Ward 6, shortly before polls closed for early voting on Monday afternoon at the Arlington Hills Community Center on Payne Avenue. “The street conditions are not great. A lot of them need repaving.”

Equally fed up with property tax increases and the general state of city services, Robbie Smith cast a “no” vote on the same question moments before her. “I’m really disappointed,” said Smith, a Ward 5 resident who said the city has fumbled core services from trash collection and tree trimming to public safety. The city council, she said, “has been doing things that are not helpful for the city of St. Paul. They’ve been raising our taxes like crazy. Just let our voice be heard.”

“I’ve lived all over the world,” she added, noting the loss of small businesses near Allianz Field in the Midway, “and this is truly a nice place to live, but we’re going downhill.”

Will Hyland voted early at the Ramsey County Elections office on Plato Boulevard, where he cast a vote for St. Paul City Council intended to protect the city’s rent control ordinance and “ensure that the rent cap stays in place,” he said. “There’s a lot of people trying to dismantle that.”

30 candidates for St. Paul City Council

In all, 30 candidates filed for seven seats on the St. Paul City Council, and seven candidates filed for four seats on the St. Paul School Board. Results in some city council races may not be available before Friday, given the city’s ranked-choice election system, which involves hand-tallying races where no candidate breaks 50% of the vote on Election Day.

Meanwhile, there are numerous city council and school board races n Dakota, Ramsey and Washngton counties as well as ballot questions for voters ot decide.

To learn more about local races across the east metro, including how to register to vote on Election Day, visit twincities.com/news/politics/elections.

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What you need to know for Election Day

Voter turnout and how long it may take to get results in St. Paul races

A referendum on abortion rights in Ohio that will test whether the end of Roe is still potent. A tight battle for control of the Virginia legislature that will send early signals about the suburban vote. Gubernatorial contests in Kentucky and Mississippi that will challenge Democrats’ ability to win despite the unpopular Joe Biden.

It’s election night Tuesday in only a handful of states — but the results in those headline contests, and in hundreds of local races, will send strong signals about voter enthusiasm heading into 2024. They’ll also give important clues about the battle for Congress — and inform the way President Joe Biden and his most likely Republican opponent, former President Donald Trump, approach the coming months.

Here are five big questions we’ll be watching tonight:

Is abortion still a big winner for Democrats?

The Supreme Court overturning Roe last summer galvanized voters and fueled a series of wins for Democrats in the midterms and special elections over the last year and a half.

Tuesday’s elections will test whether that trend continues to hold. Ohio is the most direct example, where many expect the proposed constitutional amendment to codify abortion rights to pass — the only question is by how big of a margin.

Democrats in just about every race elsewhere have run campaigns focused on abortion, from blue-ish Virginia to battleground Pennsylvania and even red Kentucky.

In the Virginia legislative races, it has been the dominant issue. Democratic television ads mentioned abortion about 2.5 times as frequently as the party’s second most talked about issue, education, according to data from the advertising tracking firm AdImpact. It has similarly been central to the Democratic candidate in the Pennsylvania state Supreme Court race.

But perhaps more surprising has been Kentucky. Democratic Gov. Andy Beshear and his allies released a series of ads targeting his opponent, state Attorney General Daniel Cameron, for his defense of the state’s near-total ban on abortion, which doesn’t include exemptions for cases of rape or incest. While it wasn’t his main theme in TV ads, it was a notable part of his messaging mix — statewide, not just in urban Kentucky — and should Beshear win on Tuesday, it will only further embolden Democrats to run on abortion next year.

There is one notable counterpunch from Republicans. Virginia GOP Gov. Glenn Youngkin has rallied candidates there around a 15-week ban with exceptions such as for situations of rape and incest. While stricter than the current state law, Youngkin’s aides believe that their message — Republicans are reasonable, Democrats are the extremists — could at least neutralize the issue.

Is Joe Biden an electoral drag for Democrats?

Biden’s approval rating continues to sink. But will voters punish Democrats for it?

Republicans in Kentucky and Mississippi — where Republican Gov. Tate Reeves is looking to hold off Democrat Brandon Presley, a state public service commissioner and distant cousin of the famous late singer with the same last name — have relentlessly looked to tie the Democratic candidates to the president, who is particularly unpopular in the deep-red states.

The contests are a test of the nationalization of politics — will Biden be a drag to races he isn’t talking about? — and a gut-check on whether Biden’s bad approval ratings are as dangerous for Democrats as they seem on paper, or more of an electoral mirage that suggests some voters are still open to pulling the lever for him, even if they aren’t necessarily happy about it.

Virginia, too, will be a place to watch. Biden is under water there in a state he won by 10 points in 2020, and many of the suburban battleground districts this year are ones Democrats have carried in recent elections — with the notable exception of Youngkin’s 2021 upset.

Will Black voters turn out?

Black voters will be central to the Democratic coalition in 2024. But are they excited to vote?

There have been early warning signs for Democrats that this crucial constituency may not give Biden the support he needs next year. Republicans flipped Louisiana’s governorship in an open-seat race earlier this year, when Republican Attorney General Jeff Landry won a surprise outright victory in October instead of having to duke it out in a runoff.

Even acknowledging the fact that the Democratic candidate, Shawn Wilson — who is Black — didn’t get much national support, the loss suggested some level of diminished Black turnout.

Tuesday’s contests will test whether that was an aberration — or Democrats need to hit the panic button.

One particularly important race to watch is the Mississippi governor’s contest. The Magnolia State has the highest proportion of Black residents of any state — roughly 38 percent — and that bloc has historically supported Democrats in statewide contests in a state where voting is very racially polarized.

This, however, is the first gubernatorial election in which a Jim Crow-era system that required candidates to win both the popular vote and a majority of legislative districts — effectively precluding Black voters from being able to elect a governor — won’t be in use.

Presley, who is white, has poured campaign resources into energizing Black voters under the new system, and their response could be telling of the broader political environment, especially for Biden.

Are Republicans actually voting early?

Trump chased Republican voters away from voting early, whether in-person or by mail, by falsely claiming that anything other than Election Day voting was a vector for fraud.

Most GOP campaign operatives agree that was a major tactical blunder. Republicans running this year have changed their tune, but can they actually alter the way Republican voters see it?

Youngkin tried mightily to get Virginia Republicans to reverse course and “secure your vote” — by voting early. With bus tours and targeted advertising, Youngkin pushed Republicans to vote before Election Day.

Preliminary data showed that a larger share of Republicans were voting early in Old Dominion than in past elections. But we won’t know until after the election whether the campaign was successful in expanding the GOP electorate — or merely getting Republicans who were going to vote on Election Day anyway to do so just a bit earlier.

Pennsylvania, too, is worth keeping an eye on. National and local Republicans pushed a “bank your vote” campaign, with the 2023 judicial contest serving as a dry run for 2024.

Are the suburbs still swinging?

Suburbs across America have been the deciding factor for nearly a decade now. What will that look like Tuesday?

Many of the battleground Virginia races are happening in some of its biggest suburbs — outside of Richmond in Henrico County, or Loudoun County in the greater Washington area. Those areas revolted against Trump and other Republicans during his presidency. And while Youngkin won neither in 2021, closing the gap was a big reason he’s in the governor’s mansion now.

Now, seats in those key suburbs will determine whether Youngkin has unified control of government for the last two years of his term — or Democrats are able to claw back power.

Elsewhere, Kentucky’s Beshear needs to maintain the suburban margins that he saw four years ago to have a chance. One place to look: Kenton County, a suburban Cincinnati county that was the largest Trump/Beshear county.

And at the same time, many Democrats are watching Beshear and Presley to see whether they can

In Saturday’s Top 25 college football matchup between Washington and USC, quarterback Caleb Williams — a past Heisman Trophy winner and projected 2024 NFL draft first-round pick — passed for 312 yards and three touchdowns for the Trojans (7-3, 5-2 Pac-12) in the 52-42 loss.

He was strip-sacked late in the second quarter and three plays later, the Huskies went up 35-28 before the half. It was the fifth time in the last six games the Trojans defense gave up at least 40 points.

After the game, Williams, 21, was shown sitting on a railing in the stands and embracing his mother with his face covered by a poster. He was visibly overcome by emotion, likely from the frustration of seeing his conference championship hopes dissipate despite his own best efforts. As he cried in his mother’s arms, the national broadcast cameras stayed there for a minute as ABC announcers Chris Fowler and Kirk Herbstreit, in tones suitable for the situation, provided context to what Williams could be feeling.

Disappointment, while not one of the more fun emotions, is something we all experience. You learn to live with it. Hopefully, you grow from it. But it comes. And sometimes it comes despite how hard we may have worked. It doesn’t come alone and it can bring along any variety of feelings, including but not limited to anger, self-doubt and sadness.

To some viewers, Williams’ vulnerability should’ve been saved for the locker room, far away from the cameras and the eyes of others. While I would agree maybe it wasn’t a time for cameras, Williams should be allowed to cry if he wants to — and so should the rest of us.

Losing sucks. Everyone knows it, from fans to athletes.

Williams transferred to USC after coach Lincoln Riley left Oklahoma to lead the Trojans following the 2021 season. It was a move the QB made because of his relationship with Riley and their desire to win together. In the two seasons since, they haven’t been able to win a Pac-12 conference championship and now their hopes for this year are gone after Saturday’s loss.

Crying is a perfectly normal response to that and while I wasn’t surprised to see those types of reactions, I humbly ask you to reconsider your stance if you don’t think it is.

When a team wins a championship and players cry, no one cares. No one asks them to go do it somewhere else. We simply don’t because we understand the joy of seeing the results of hard work. We understand sometimes people can be so overcome with joy that they cannot contain it, and crying can be an expression of it.

We watch athletes yell, chest bump, chant and cheer as they compete. We should be OK with the other side too. The impact of our passion hits us all in different ways. A good cry can be cathartic, cleansing. Encouraging others, or ourselves, to bottle up feelings and save them for another time keeps us emotionally unintelligent.

As a society, we should have positive responses to seeing other people’s emotions. If Williams’ reaction made you uncomfortable, perhaps that’s something to think about and explore. We should welcome him being comfortable enough with how he feels to let it out in a healthy way. How can we encourage young people to take care of their mental and emotional wellness if we also tell them there is shame in crying?

A few months ago, I wrote about the emotional connection fans have to sports. We would be remiss if we didn’t also acknowledge athletes have those connections as well.

College athletes are playing for their futures. They’re living their dream while chasing another and doing it in front of thousands of fans each week. Fans who sometimes can be awful because of a mistake made on the playing field.

“I want to go home and cuddle with my dog and watch some shows,” Williams said when asked how he felt after yet another big performance wasn’t enough.

“Like, we lost the game,” he added. “I work hard throughout months, years to have big games like this, try and go win and play your best, each and every one of us. We came out with a loss today, so emotionally I want to go home and I want to play with my dog.”

Who among us hasn’t?

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