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More 401(K) Loan Taking By 'Sandwiched' Employees

Saturday, May 18, 2013 - 9:53 AM
From SHRM (Society of Human Resource Management):
There was a 28 percent increase in the number of participants taking loans from their 401(k) plan in the fourth quarter of 2012, and the average new loan balances rose to $7,126, up from $6,662 for loans taken in the fourth quarter of 2011 (a 7 percent increase), according to an analysis of nearly 2 million participants enrolled in Wells Fargo-administered defined contribution plans, the bank reported.

Of participants who took out loans, the greatest percentage were in their 50s (34.2 percent), followed by those in their 60s (28.9 percent) and those in their 40s (27.3 percent). The increase among participants in their 50s was nearly double the increase among those under 30.  

The increased loan activity, particularly among older participants is concerning because those are the years when workers can start to make catch-up contributions and really need to focus on preparing for retirement.  

...  Employees who cash out their 401(k) plans when they leave an employer, however, are a greater concern.

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