AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREThe top 10 theme park moments of 2019 The smart thing, of course, would be to keep the money growing tax-deferred by leaving it in the employer plan or rolling it over to an IRA or another qualified retirement plan. By cashing out, workers are likely to fritter away their retirement savings. On top of that, they owe income taxes on the money withdrawn, plus a 10 percent penalty if under age 55 (it is 55 for 401(k) plans when leaving a job, not 59, as it is for IRAs). “Our findings show that too many workers are not looking at their 401(k) savings as long-term in nature but are instead using termination of employment as an opportunity to spend this money,” said Lori Lucas, director of participant research at Hewitt. Younger workers are more likely to take the money and spend it (66 percent of those age 20-29 cashed out). That’s unfortunate, since they have the most time to let even modest 401(k) savings compound tax-deferred into significant amounts. Among those 40 to 49 years old, 42 percent chose to take the money. “Many workers who are closer to retirement can be tempted to consume rather than save,” Lucas said. More bothersome news items: Based on estimates by the Federal Reserve, Americans now devote the biggest portion of their after-tax income to pay down debt. For the first quarter this year, this “debt-service” ratio stood at 13.4 percent, the highest ever since the Fed began tracking the number in 1980. The main reason? Tempted and buoyed by a hot housing market, low interest rates and “easy” loan terms, consumers are snapping up large mortgages and home-equity loans. A growing amount of this debt is adjustable-rate, leaving overstretched borrowers increasingly vulnerable. “I suspect that about five years from now we will see significantly higher interest rates, resulting in both a flat real estate market and an increased number of foreclosures,” said John W. Schaub, a veteran real estate investor and newsletter writer in Sarasota. Borrowers using variable-rate loans “may be unable to repay as rates increase,” he said. A study commissioned by Visa USA found that 47 percent of the more than 1,000 persons surveyed paid a bill late and/or incurred late-payment fees during the previous year. The biggest culprit was not lack of money but lack of organization and letting household bills “slip through the cracks.” Automating payments through electronic funds transfer and/or handling bills as they come – strategies long advocated in this column – would solve most if not all the problem. Aside from the pesky fees, late payments can lower your credit score. A new study by the mutual fund research firm Morningstar confirms what many others have found: Investors’ actual returns are not as good as those of the funds in which they invest. That’s because investors tend to “chase performance,” buying high and selling low. While this finding held true for all types of equity funds, results were particularly awful with the more volatile funds, including those that invest in a single industry. For example, while technology stock funds gained an average 7.68 percent a year over the 10 years that ended April 30, investors in those funds lost an average 5.67 percent a year by moving in and out at the wrong time. “In general, the more volatile a fund, the more likely it is that investors will be motivated by fear or greed,” wrote Russel Kinnel, Morningstar director of fund research and designer of the study. The antidote to fear and greed is the discipline to follow a well-thought-out, long-term investment plan suited to your goals and risk tolerance. But discipline is often in short supply. Consider this last item: A Senior Sentiment Survey commissioned by reverse-mortgage lender Financial Freedom found that 56 percent of Americans 62 to 75 years old, if given a second chance, would have started earlier saving for retirement. Among this group, most said they would start before age 30. But didn’t we see, at the beginning of this column, that most 20-something job-switchers spend rather than save the money from their 401(k) plans? Humberto Cruz offers personal finance advice each Thursday and answers readers’ questions each Saturday. Write him at [email protected] local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! Why do we do this to ourselves? In recent weeks, I’ve run across a spate of news items that illustrate Americans’ questionable financial habits – and the regret we feel after the fact. For example: Despite a growing need to save for retirement, 45 percent of workers in company-sponsored 401(k) plans take the money and run when they leave their jobs, according to a study by the human resources consulting firm Hewitt Associates.