Should I have to take my annual cost-of-living increase out of my retirement account? My employer says I do.?

Question

Now that I have been with my employer for more than three years, I qualify for a retirement account. My employer says he no longer has to give me a cost-of-living annual pay increase, and that if I want "a raise", I can just take it out of my retirement package. I need feedback, please!

Answer 1

Never, Never, Never touch your retirement account. Compound interest is your best friend. Your employer is being plain cheap. He knows that you get penalized 20% for early withdrawals and the IRS hits you for another 10% penalty plus taxes the income as well. You LOSE at least 35% of every dollar you withdraw.
DON'T DO IT!

Answer 2

Generally speaking (and I'm not a lawyer), unless there is an employment agreement, such as a union contract, there is never any assurance of getting a raise. If an employer chose never to give a raise, it would be legal. However, since he might find it difficult to retain trained employees, it's more profitable for him to give raises than to deal with excessive employee turnover.

In your case, you have no reason to use your savings or pension money to fight inflation (and unless you're older than 59 and 1/2 years old, I don't think you could legally take the money out of the pension plan even if you wanted).

Your boss is taking advantage. Try to get a better job.

Answer 3

Hi...

What is this 3 year time period... You can have a 401k on line...

The problem, I think, is that your employer is FORCED to put
HIS PORTION in your retirement account... So, if you take a
plan, you force him to pay more.... and you cost him more...

Be careful, if he is so mean... he may also find some way to let
you go....

If so, get ready and call the goverment now to find out your rights
before he let's you go....

It is harder to prove after you are gone...

Good luck...