Record High: 28% of 401(k) Account Holders Have Outstanding Loans

Record High: 28% of 401(k) Account Holders Have Outstanding Loans

http://www.shtfplan.com/headline-news/record-high-28-of-401k-account-holders-have-outstanding-loans_05192011

With some 3.47 million people (up nearly 60,000 in April) currently receiving emergency unemployment benefits and a total of 8 million receiving benefits from all programs, it only makes sense that despondent Americans are tapping all available means to maintain some semblance of normalcy.

According to AON Hewitt, Americans are taking loans from their 401(k) accounts now more than ever before in an effort to stay afloat:

This report explores the magnitude of the problems, their impact to participant savings and ideas to curb these behaviors.More than 1.8 million employees were examined across over 110 large defined contribution plans. Participant data wasanalyzed through year-end 2010.

…

Through the mid-2000s, loan usage was fairly steady.However, in the years following the 2008 financial crisis, loan usage has steadily climbed. As of year-end 2010, nearly28% of active participants had a loan outstanding, which is a record high. Nearly 14% of participants initiated newloans during 2010, slightly higher than previous years. The average balance of the outstanding amount was $7,860,which represented 21% of these participants’ total plan assets. Although the majority of the participants (68.3%) hadonly one loan outstanding, 29.2% had two loans outstanding simultaneously and 2.5% had more than two loans.

What choice do people have when they can’t find jobs, unemployment compensation is not enough or runs out, and the price of everything important is rising?

And what, pray tell, is the solution from Congress? Simple. Restrict Americans’ ability to take out loans from their own accounts (but it’s ok for the government to raid pension funds when they need money!).

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