Are You Spending Retirement Money to Stay Afloat?

(MoneyWatch)  Although my 401(k) is down substantially from where it was in November 2007, at least I haven't had to dip into it to pay the bills.

That isn't the case for many Americans, according to a new survey from Consumer Credit Counseling Services of Greater Atlanta. (Full disclosure: I sit on a national advisory board for CCCS of Greater Atlanta. The group, which consists of representatives from the nation's top lenders, credit card companies, housing agencies and other foundations, meets once a year to discuss what is going on in the real estate world. It is an unpaid position.)

Survey results released last week show that 29.6 percent of people who called the nonprofit agency for foreclosure prevention counseling received an early distribution from their 401(k) or other retirement plan within six months before contacting the agency.

The survey also found that half of homeowners who are being counseled for foreclosure prevention are "very worried" they will not have enough assets to retire, and 15 percent assume they will not be able to retire at all.

Interestingly, fewer than 15 percent of CCCS of Greater Atlanta's bankruptcy clients reported withdrawing cash from a retirement plan in the past six months. Since retirement plans are assets that are protected in a bankruptcy, CCCS of Greater Atlanta believes these clients chose to swallow the bitter pill of bankruptcy today, protecting their nest egg for the future.

The real question is what do you do once you've drained your 401(k), and (perhaps because of a job loss, illness, or death) still can't get your finances under control? Unfortunately, I think a fair number of Americans are about to find out.

Are you spending retirement money to stay afloat? How are you dealing with the tax fallout?