American investors who claim that they want control of their pension plan investments to secure their retirement do not know what they are doing, according to Putnam Investments.
Speaking about the findings of a new survey into 401(K) retirement plan holders, Matthew Mintzer, a senior vice president at Putnam, said: Investors say retirement is their top personal financial priority and that they want control of their investments. Many don’t know what to do and end up undermining their long term security.
The Putnam commissioned survey, Retirement Savings in an Unsettled Economy, found that 30% of US workers who switch jobs take a cash payment from their old pension fund instead of switching the money to another. Amongst workers aged 18 to 34 years old, nearly 40% chose to take the cash.
According to the survey US investors will pay a total of $7.1bn to $8.3bn in federal taxes and penalties when they take withdraw money from their 401(K) retirement plans. This year, the Putnam survey predicts that a potential maximum of $39bn will be withdrawn from 401(K) accounts.
The survey also asked 401(K) plan members what they would do differently, if they could relive the last 12 months as an investor. The survey found that 37% of those polled were unsure of what to do.
There were some encouraging signs however, as the survey found that 43% of workers, when faced with the choice of either taking a cash payment or transferring the money to another pensions product chose to reinvest the money.
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