Study: Americans Use 401(k) Plans To Make Ends Meet
July 27, 2008
As traditional outlets for borrowing money, particularly home equity lines, have been closed off during the country’s credit crisis, a recent study finds that Americans are increasingly dipping into their 401(k) plans to make ends meet.
The study, “Robbing Tomorrow to Pay for Today,” was produced by The Center for American Progress, a liberal think tank. It notes that workers are taking money out of their 401(k) plans to pay for immediate expenses and cites two reasons for that: the lack of any or adequate health insurance and the relative easiness of borrowing from a retirement plan.
The study found that middle-class families are most likely to borrow from their retirement plans when they buy a home, lose a job, or are in poor health. Retirement plan participants can borrow up to half of their savings but must repay the loan in five years.
The Center urges policymakers to reduce the need for such borrowing by ensuring “substantial improvements to income growth for America’s families, and a commitment to providing health and unemployment insurance to citizens who experience unexpected health expenditures and job loss.”
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