Half (49 per cent) of U.S. employees younger than age 34 are withdrawing early from an individual retirement account or 401(k), according to a new survey by Morgan Stanley.

The survey, which polled more than 900 U.S. workers, found among those making early withdrawals, 20 per cent said they needed the money to pay for education, followed closely by medical emergencies (19 per cent).

Nearly two-thirds (65 per cent) of respondents said health-care costs are the largest barrier to saving for retirement, followed by education costs or paying down student loans (63 per cent) and living expenses like food or utilities (60 per cent).

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Among young workers, the top three benefits beyond traditional health insurance are retirement plans (61 per cent) were insurance other than health (60 per cent) and education reimbursement (41 per cent).

“The rise of education costs has been a pervasive challenge, so it’s no surprise to see the toll it has taken on young investors,” said Mike Loewengart, managing director of investment strategy at E*TRADE from Morgan Stanley, in a press release.  “While drawing down on retirement savings may be tempting when you have a long runway to retirement, young investors lose out on the power of compounding. Further, early withdrawals can come along with penalties, so understanding the magnitude of the decision is critical.”

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