(July 16, 2008)—A new study finds people are dipping into their 401(k) retirement plans to cover such financial hardships as a job loss or medical emergencies.
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 in 1989 to $31 billion 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 people will have when they do 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.
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