Household Borrowing from 401(k) Plans

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More and more families have access to pension funds prior to retirement since 401(k) plans increasingly offer loans and withdrawals to encourage participation. The newly released 1998 Survey of Consumer Finances shows that borrowing from pension plans has increased dramatically and more than doubled between 1992 and 1998. Most loans are used for home purchases and other durable consumption. The problem with using pension funds prior to retirement is, of course, the increased risk that retirement income will be inadequate.