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Americans Tap Savings to Cope with Economy

Experts advise other measures before depleting nest eggs

By Mark Huffman
ConsumerAffairs.com

November 20, 2008

Personal Finance • Staying Healthy in a Sick Economy • Consumer Confidence Sinks to Historic Low • How Retirees Can Survive the Bear Market • Are Men Hardwired to Overspend? • Shopping Poll Holds Bad News for Retailers • 533,000 Jobs Lost in November • Feds Report More Signs of Recession • Consumer Confidence Rebounds in November • Cheap Oil May Be Economic Stimulus • Job Security Lacking This Holiday Season • An Upside to the Down Market: A Lower Tax Bill • Americans Tap Savings to Cope with Economy • Economists' Panel Sees Prolonged Recession --- • More Personal Finance News

Experts advise other measures before depleting nest eggs As the economic slide continues into the holiday season, more Americans are making ends meet by turning to one of their last resorts -- their savings.

A new COUNTRY Financial survey shows people are tapping their savings more now than in July, even after slashing their spending.

"This is a tough time for a lot of Americans, but before using your savings to make ends meet, try to find some other way to cut spending," says Keith Brannan, vice president of Financial Security Planning at COUNTRY, a financial services firm.

"Being financially secure means safeguarding what you've achieved and saving for your family's future, even in tough times. Depleting your savings, whether it's a passbook account or a retirement fund, should be one of the last methods you use to stay afloat, " he added.

A vast majority of Americans are concerned about their personal finances when looking toward the holiday season. Seventy-seven percent say they are very or somewhat concerned about their personal finances as they look to the holidays, with the majority saying they will rely less or about the same on credit this holiday season than last year.

Americans cut spending

Sixty-seven percent say they have cut spending to cope with the uncertain economy, up from 65 percent who took this action earlier in the year.

Sixty-two percent say cutting spending has either significantly (18 percent) or moderately (43 percent) helped cope with the economy.

Reliance on credit dwindles

Fewer Americans (21 percent) are relying on credit to get by than did in July (26 percent).

"Whether it is consumers making smart choices or credit card companies tightening their lending standards, less reliance on credit is a positive thing for Americans," adds Brannan. "If you want to cut spending and credit card use, it's important to have a tangible plan you can follow. If you don't have time or are uncomfortable making these decisions on your own, get help from a knowledgeable financial professional."

Tips to keep in mind for preserving long-term savings:

Withdrawing money from your 401(k) account can cost you more than you might think. In addition to the income tax you could owe, you will have to pay a penalty. Plus, many employers will withhold a percentage of your withdrawal amount for income tax purposes.

If you find yourself tapping into your savings regularly, consider contributing less to your savings accounts temporarily, but don't stop contributing altogether.

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