In contradictory fashion, paying off debt was cited as the top reason for taking out a loan from retirement plan savings (46%), yet only 26% of respondents said paying off debt was a good reason to take out a loan.

In light of these non-saving priorities, employers should discuss and focus participants on what it will take to be retirement ready by providing the employees with various tools and resources for them to use and make it happen. Some advantageous features include: company contributions, immediate plan eligibility, immediate vesting and auto enrollment.

“If loans are necessary to cover an emergency or the loss of a job, people should seek advice to minimize the loan’s long-term impact on their retirement savings,” says Teresa Hassara, executive vice president of TIAA-CREF’s Institutional Business. “It’s a good example of why plan sponsors should make financial education and advice a core component of their plans.”

Women were more likely than men (52% to 41%) to take out a loan to pay off debt; however, men were more likely (40% to 29%) to take out a loan to pay for an emergency expenditure.

Research from TIAA-CREF shows that nearly one-third (29%) of Americans who participate in a retirement plan say they have taken out a loan from the savings in their plan, 47 percent of those who have taken out a loan from their retirement plan savings borrowed more than 20 percent of their savings, with 9 percent of respondents borrowing more than 50 percent.

Thirty percent of those that withdrew took out 30% of their savings or more. More specifically:

  • 26% withdrew 10% or less.
  • 23% withdrew between 11-20%.
  • 17% withdrew between 21-30%.
  • 13% withdrew between 31-40%.
  • 8% withdrew between 41-50%.
  • And 9% withdrew between more than 50%.

The other 4% weren’t exactly sure how much they took out.
See also: More retirees planning to work through the golden years

A recent Financial Finesse report on overall retirement preparedness has shown small improvements since 2011. However, the report also shows most participants have not taken the time to review the retirement income they will need to retire.

In addition to borrowing from their savings, many Americans are also contributing less to their retirement plans as they pay back their loans.

Experts caution that due to the financial crisis, the increase in retirement withdraws to ease financial stress now could pose a risk in the future.

“Individuals should weigh all of their options carefully before borrowing from their plan savings or reducing their contributions,” Hassara adds. “Loans can undermine retirement savings and cause investors to miss out on earnings from rising markets. It’s important to evaluate the benefits of taking a loan now against the need for those earnings to build long-term retirement security.”

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