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MarketWatch site logo design. Here’s what the results are once you take out that loan in your 401(k)

MarketWatch site logo design. Here’s what the results are once you take out that loan in your 401(k)

Private Finance

Elizabeth O’Brien’s Retire Well

Posted: June 29, 2015 1:34 p.m. ET

ElizabethO’Brien

Almost all of today’s workers won’t have retirement benefits to fall right straight back on in older age. Considering that we’re on our very own in funding our your your retirement, what makes a lot of of us sabotaging our future safety by borrowing from our 401k plans?

Simply over one in four, or 26%, of 401k individuals has that loan outstanding, according to a current report from Aon Hewitt, a benefits consulting and administration company. While that research didn’t capture reasons why, an independent one carried out year that is last TIAA-CREF discovered paying down financial obligation to end up being the main good reason why individuals took down that loan, followed closely by investing in an emergency spending.

While 401k borrowers are borrowing from by themselves, it isn’t a safe transfer of cash in one pocket to some other, specialists say. “The most useful spin you can place upon it is it is the smaller of a few evils, ” said Greg McBride, primary economic analyst for Bankrate.com.

After all, many Americans aren’t sitting on 401k balances that they’ll manage to skim. Based on Fidelity, the typical balance that is 401k $91,300 by the end of 2014. That amount won’t also cover the average retiree’s health-care expenses, according to Fidelity’s very very own estimates. (A 65-year-old few retiring in 2014 will incur on average $220,000 in your your retirement medical expenses, Fidelity tasks. )