401(k) Loans = Retirement Insecurity

Source: Robert Reeves and Pamela Villarreal, National Center For Policy Analysis, Brief Analysis No. 615 April 25, 2008

The popularity of 401(k) plans has grown in recent years. According to the Employee Benefits Research Institute, almost two-thirds of employers offer such plans and millions of employees now contribute to them. These defined contribution plans allow workers to set aside part of their earnings in tax-deferred retirement accounts that are invested in stock and bond funds. A worker can begin to withdraw funds from the account without penalty at age 59 and one-half. All contributions, as well as accumulated dividends and interest, are subject to income tax when the funds are withdrawn.

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