Retirement Raidings

Americans are borrowing record amounts from retirement savings. Should 401(k) loans be limited?

In good news for Americans’ retirement security, new data shows Americans might finally be saving more for retirement. But Americans are also borrowing more from their retirement accounts, thereby potentially erasing a big chunk of these gains.

Over the 12 months ending in June 2015, Americans on average socked away a record high of $10,180 into retirement savings, according to recent data from Fidelity Investments. At the same time, more than 1 in 5 Americans – or 21.9 percent -have an outstanding loan against their 401(k). According to Fidelity, the average balance for these loans at the end of June was $9,720 – up from $9,500 a year ago.

Paradoxically, says Doug Fisher, Senior Vice President at Fidelity Investments, larger account balances might be prompting bigger loans. “I call it the ‘false sense of continued prosperity’ effect,” he said. “When 401k balances go up because the stock market rises, people feel like they have more wealth and borrow more.”

The actual result, however, could be significant long-term damage to Americans’ retirement security.

Continued at the Washington Monthly…