According to the Investment Company Institute, a disturbing trend is growing among employees with 401(k)s, about a fifth of participants with access to 401(k) loans take them. American companies are trying to stem the tide, but borrowing against the cash is hard for some participants to resist, and for others it’s necessary to survive. Anne Tergesen writes:
American companies are trying to stop employees from raiding their 401(k)s, in an attempt to ensure that older workers can afford to retire and make room for younger, less-expensive hires.
Employers of all types—from Home Depot Inc. HD -0.08% to a mortgage lender—are taking steps to better inform workers of the financial implications of borrowing from their retirement accounts and pulling the money out when they leave jobs.
Tapping or pocketing retirement funds early, known in the industry as leakage, threatens to reduce the wealth in U.S. retirement accounts by about 25% when the lost annual savings are compounded over 30 years, according to an analysis by economists at Boston College’s Center for Retirement Research.
Read more here.
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