“We made two trips and it just got to be real expensive,” she said. “That money, it was a security that I needed.”
Still unemployed, Cromie is trying to avoid tapping what’s left of her retirement savings -- $7,000 that would be subject to taxes and a 10 percent extra penalty if she touches it in the next two to three years, before she turns 59 1/2.
It’s a small number that’s part of a much larger picture: The Internal Revenue Service collected $5.7 billion in 2011 from penalties, meaning that Americans took out about $57 billion from retirement funds before they were supposed to.....
“They didn’t have access to the home equity that they had in the past,” Cramer said. “And families looked around for what was left and they actually drained the value from the 401(k).” In 2011, 5.7 million tax returns, or about 4 percent of all U.S. households, reported paying penalties on early withdrawals. The government collected more than enough money from these penalties to fund the National Oceanic and Atmospheric Administration. As economic conditions deteriorate, such withdrawals spike, as they did in 1991, 2002 and 2007. The inflation-adjusted penalty collections declined 5 percent in 2011, the last year for which complete data is available.