PERU Borrowing from retirement accounts and reducing or delaying retirement savings appear to be local trends as people react to higher living costs and a slowing economy. Clark Forster, owner of CFA Insurance, stated the number of people borrowing from their retirement accounts has easily doubled, compared to three years ago. Many people say theyre behind on their heating and electric bills, said Forster, while others dont have enough money for full-time daycare in the coming summer months. Borrowing, he said, is skewed toward younger families. People are borrowing against their pension like something Ive never seen, Forster said. Many are asking what the maximum amount is that they can borrow and thats where theyre going. CFA Insurance isnt the only company reporting the trends Forster described. Robert P. Donlan, partner of Donlan and Barcomb Financial Services, Plattsburgh, said he has experienced similar situations. I have been getting increased calls of that nature, said Donlan. Ive had eight to 10 in the last month. Many people dont have the money to weather the storm, he added, recalling one family whose gasoline expenses alone total $1,000 a month. Jonathan Whitehouse, account manager for Northern Insuring Inc., Plattsburgh, said people often give the cost of groceries and gasoline as reasons for decreased savings for their retirement years. Some clients have been reducing retirement plan contributions and we havent seen as many making their annual contribution increases, he said. Larry Shipps, a financial advisor with Burnham Financial Services, Lake Placid, said he has seen increased activity in retirement accounts designed for certain employees of public schools and tax-exempt organizations. There clearly have been more hardship withdrawals from 403(b) accounts, Shipps said. Also, when people become eligible to enroll in a plan, theyre just a little slower to say yes and many are not contributing as high a percentage of their pay. Borrowing from some retirement plans many have a greater impact than borrowing from others. In some plans, an employee may not be able to participate in the plan for up to a year following a withdrawal. If the employer offers a match on contributions, Forster explained, the free money is off the table and the cost of the decision grows. Loans must be repaid and local loan defaults are increasing. Its something Forster considers a dangerous situation for several reasons. A loan default triggers a distribution from the employees retirement account, Forster explained. While the distribution repays the loan, the consequences include a 10 percent IRS penalty and imposition of federal and state income taxes. A loan can turn into a penalty driven withdrawal, he further explained. The resulting 10 percent penalty, along with federal and state taxes, gets added to the lost match from the employer and the seemingly wise loan is perhaps the most expensive place to have obtained funds. Most financial advisors say any family facing financial challenges should seek competent financial advice, have a good financial plan and take a critical look at their spending habits. Those thinking about borrowing or withdrawing money from their retirement program are also encouraged to take the time to explore alternative solutions before making a decision.