In a unique paper entitled, “Borrowing through the Future: 401(k) Plan Loans and Loan Defaults, ” Olivia S. Mitchell, Wharton teacher of company economics and general public policy, analyzes the loans individuals just take from their 401(k) retirement plans, why they take these loans and what the results are when these borrowers leave their jobs. The paper ended up being co-authored by Timothy (Jun) Lu from Peking University, HSBC company class, and Stephen P. Utkus and Jean A. Younger, both from Vanguard Center for Retirement analysis.
Knowledge@Wharton asked Mitchell to conclude her research and talk about its implications for company professionals, customers and regulators.
An edited transcript for the discussion follows.
Knowledge@Wharton: Please briefly describe your quest.
Olivia Mitchell: My research in this region happens to be concentrating on the loans that folks simply just just take from their k that is 401 plans. It’s quite common for employers to permit loans through the retirement benefits, plus in reality, we realize that at any moment, about one 5th of all employees took that loan. Over a period that is five-year up to 40% take loans. Therefore it is a practice that is common.
We’ve examined why individuals just take loans, what goes on if they do, plus in specific, what are the results once they terminate their jobs. At that time, they should spend back once again their loans in complete or incur income tax along with a 10% penalty. Therefore, we’re worried about whether folks are employing their s that are 401(k piggy banking institutions.
That which we discovered ended up being that plan loans have become widespread. 继续阅读Borrowing through the Future: 401(k) Loans and Their effects