A lot of Americans are looking at the short-term when it comes to their retirement plan balances. Thirty percent of investors who faced a choice about their plan balances, either because of leaving a job or retiring, said they took a cash payment, according to a recent study by Putnam Investments of Boston.

Because they do not exercise other options, such as rolling over the money to another employer's plan or to an individual retirement account, American investors pay between $7.1 billion and $8.3 billion in federal taxes and penalties a year unnecessarily, according to Putnam. Investors who take early cash payments from 401(k) plans have to pay between 15 percent and 39.6 percent in federal taxes, in addition to 10 percent penalties if they are under 55, the company said.

While nearly one-third of respondents cashed out when they had the chance, 43 percent rolled money over to an IRA, 19 percent left their balance in their former employers' plans and 10 percent moved money into a new employer's plan, according to Putnam.

The study, Retirement Savings in an Unsettled Economy, was conducted in April and surveyed 1500 Americans, according to Putnam. Those who qualified for the survey were either eligible to participate in a 401(k) plan, had at least $2,500 in an IRA, or retired, changed jobs or temporarily left the work force in the last three years. Putnam is not releasing the full study.

"The over arching finding is one of the oldest stories in the books, perception versus reality," said Matthew Mintzer, a senior vice president and director of product development for Putnam Retail Management. "People realize that they need to be saving for retirement." About 74 percent of respondents said they have the primary responsibility for their retirement income through their own savings or investments, and 78 percent said that retirement is their most important personal financial priority, according to Putnam.

"But then the reality is they get to making a job change or retiring and such a large percentage, 39 percent of the 18- to 34-year-olds and 30 percent of the 35- to 54-year-olds were cashing out. That reinforces the lack of knowledge, the importance of education, the importance of advice and the advisor to say, Here's where you really are. Here's where you need to be. And here's our plan. The last thing you want to do is cash out and pay penalties and income tax."

While investors reported being affected by the decline in equity markets last year, the overall downturn seems to be less of a reason for the early cash payments than the fact that investors do not know how they are invested or their options at the point of retirement or a job change, according to Mintzer.

"We did ask them how they felt from an investment perspective with the lessons learned from the marketplace," he said. "What we found out is that people really didn't understand how their portfolios were currently allocated. In the neighborhood of 38 percent didn't even know at all how their assets were allocated."

Also, when asked what they would do differently about their investments in the last 12 months, 37 percent said they were unsure, according to Putnam.

It is not merely the 401(k) providers who should be educating investors about their options when it comes to saving for retirement, according to Mintzer. It is also the responsibility of the advisor community, the mutual fund industry and the media, he said.

"We have to reset Americans' expectations and realities," said Mintzer. "We have to let them know that, Yes, you are saving. That's good, but you are not saving enough, and most importantly, when it comes to the point of leaving your company or retiring, don't get the check. You can very easily keep that tax-deferred growth going in an IRA. And here's the ways to do it.' I think that's [the responsibility of] all of us. I don't want to say it's just the plan sponsors' responsibility because I think there's a lot of people that have skin in the game."

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