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Household Borrowing from 401(k) Plans

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by Annika Sundén and Brian Surette

JTF#1  

Introduction

In order to encourage participation, 401(k) plans increasingly offer loans and withdrawals. This means that more and more families have access to pension funds prior to retirement. The newly released 1998 Survey of Consumer Finances shows that borrowing from pension plans has more than doubled between 1992 and 1998. The problem with using pension funds prior to retirement is the risk that retirement income will be inadequate. The questions are "Why do people borrow" and "What do they do with the money?"

For full paper in PDF

Annika Sundén is the Associate Director for Research at the Center for Retirement Research. Brian Surette is a Senior Economist at Freddie Mac. The authors thank Raphael Bostic, Dan Covitz, Elizabeth Kiser, and Alicia Munnell for helpful comments. The views and remaining errors are those of the authors.
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