When you change jobs, do you take the money and run? A large and growing number of young and low-income workers do just that with their 401(k)s, and it's damaging their chances of building adequate retirement savings down the road.

Data released today by Fidelity Investments shows that 35 percent of all participants in plans it administers cashed out their 401(k) balances when leaving their jobs last year, and the trend was even worse for young and lower-income workers. Four out of 10 workers (41 percent) age 20 to 39 cashed out, and 51 percent of workers who left jobs grossing under $30,000 cashed out.

Fidelity has been tracking cash-out data only since 2009, but a study of the overall retirement market released last year shows an accelerating trend. HelloWallet, a firm that provides software-based financial guidance tools for employers and employees, analyzed Federal Reserve data and found that $60 billion was cashed out from workplace plans in 2010, up from $36 billion in 2004.

"The overall trend is a large and systematic increase in the rate of money coming out of 401(k) accounts for non-retirement spending,says Matt Fellowes, HelloWallet's chief executive officer. The firm's study found that 401(k) breaches were most likely to occur in low-income households living on the financial edge - that is, those that had no liquid emergency savings, sometimes missed bill payments, lacked health insurance or carried credit card balances.

The 401(k) business continues to be a tale of two cities.

Fidelity, the plan administrator with the country's largest base of participants, noted strong growth in its account holders' 401(k) balances. That was largely the result of the stock market's surge last year. The average balance at the end of the fourth quarter was a record high of $89,300, up 15.5 percent from a year earlier. For pre-retirees age 55 and older, the average balance was $165,200. A full 78 percent of the increase was due to market gains.

But the cash-out data underscores how economic stress is preventing a major segment of American workers from saving - even when they have access to a retirement plan at work. (Just 58 percent of full-time workers ages 25 to 64 were offered some form of pension at work in 2010, according to the Center For Retirement Research at Boston College.

Cashing out - compared with leaving savings in a former employer's plan or rolling over to an IRA - comes with major downsides. Cash-outs before age 59 1/2 are subject to a 10 percent penalty in most cases. (One exception: The 10 percent penalty isn't applied to savers at least 55 years old who retire, quit or are laid off under the 72(t) section of the IRS code.)

Withdrawn sums also are taxed as ordinary income. Together, penalties and taxes can eat up a substantial portion of the withdrawn funds. Fidelity provides this example: A 36-year-old saver cashes out a $16,000 nest egg. Assuming 20 percent federal and state tax withholding rates, $3,200 would be withheld by the employer, and she would be hit with an additional $1,600 in penalties - reducing her net withdrawal to $11,200.

Even more important, she will miss out on the compound growth that would have accrued by leaving the money in a 401(k) or IRA for the long haul. At age 67, the nest egg would be worth $87,500 in today's dollars, Fidelity calculations show, assuming a 4.7 percent annual real return and no additional contributions. (The growth calculation doesn't include fees or taxes that would be paid on withdrawal.)

Cash-out rates have been rising because of economic stress facing retirement savers. "The population we really see cashing out at higher rates are younger and lower-income participants," says Jeanne Thompson, a Fidelity vice president. "They're paying off debt, especially student loans, or they want to buy a car or first home. It looks like a source of quick cash to them."

A second HelloWallet study last year identified debt pressures as a special worry among 401(k) savers. Debt loads increased 9 percent from 1992 to 2010. Among near-retirement households (age 50-65), debt soared 69 percent over that time period.

Weighing The Options

Problems with pension "leakage" have prompted some policymakers to call for tighter rules aimed at preventing early withdrawals. But some experts worry that might dampen contributions by workers worried about gaining access to their money in a tight spot.

Ramped-up education efforts by plan sponsors might help. Most employers send out termination kits to departing workers that lay out options, including leaving savings in the company plan or rolling over to a new employer's plan or an independent IRA. "Sponsors can elect to have one of our reps call to walk through the options, although not all of them do," says Thompson.