NEW YORK (AP) - A new study finds people are using their 401(k)
retirement plans to cover financial hardships such as a job loss or
The Center for American Progress says that between 1998 and
2004, 12 percent of families dipped into the funds. The center has
also found that the annual borrowing went from 6 billion dollars in
1989 to 31 billion dollars in 2004.
The study's author says even though most of the loans are repaid
without penalty, pulling those funds out of the retirement accounts
lessens the amount a person will have when he or she does retire.
Another study by Hewitt Associates finds that four out five
workers are not putting enough into their 401(k) accounts. It says
employees are saving enough to replace 85 percent of their income
in retirement, but when inflation, longer life spans and medical
costs are factored in, they'll need to replace 126 percent.