Record High: 28% of 401(k) Account Holders Have Outstanding Loans

by | May 19, 2011 | Headline News | 32 comments

Do you LOVE America?


    With some 3.47 million people (up nearly 60,000 in April) currently receiving emergency unemployment benefits and a total of 8 million receiving benefits from all programs, it only makes sense that despondent Americans are tapping all available means to maintain some semblance of normalcy.

    According to AON Hewitt, Americans are taking loans from their 401(k) accounts now more than ever before in an effort to stay afloat:

    This report explores the magnitude of the problems, their impact to participant savings and ideas to curb these behaviors.More than 1.8 million employees were examined across over 110 large defined contribution plans. Participant data wasanalyzed through year-end 2010.

    Through the mid-2000s, loan usage was fairly steady.However, in the years following the 2008 financial crisis, loan usage has steadily climbed. As of year-end 2010, nearly28% of active participants had a loan outstanding, which is a record high. Nearly 14% of participants initiated newloans during 2010, slightly higher than previous years. The average balance of the outstanding amount was $7,860,which represented 21% of these participants’ total plan assets. Although the majority of the participants (68.3%) hadonly one loan outstanding, 29.2% had two loans outstanding simultaneously and 2.5% had more than two loans.

    Source: AON Hewitt (pdf)

    What choice do people have when they can’t find jobs, unemployment compensation is not enough or runs out, and the price of everything important is rising?

    And what, pray tell, is the solution from Congress? Simple. Restrict Americans’ ability to take out loans from their own accounts (but it’s ok for the government to raid pension funds when they need money!).

    As is generally the case, government must get involved. The proposed legislation will extend the time a borrower has to pay back their own money, but makes it more difficult to borrow:

    “Because of the difficult economic times, more and more Americans are treating their retirement accounts as rainy day funds,” Senator Herb Kohl, a Wisconsin Democrat, said in a statement today. “A 401(k) savings account should not be used as a piggy bank.”

    Kohl, 76, who’s chairman of the Senate Special Committee on Aging, introduced the “SEAL 401(k) Savings Act” with Senator Mike Enzi, 67, a Wyoming Republican. The bill would reduce the number of loans workers may take from a 401(k) and give participants more time to repay after losing a job. It will allow savers to contribute to their plan after taking a hardship withdrawal and ban debit cards linked to the accounts, according to the legislation.

    Source: Bloomberg

    Who better to take the lead the Senator Kohl (D-WI)? Mr. Kohl, of course, has an in depth understanding of what Main Street Americans must be going through considering his net worth is reported to be a paltry $231 million as of 2009 (ranked #3 in the Senate).

    It’s curious that, while the US government commits to forgiving $1 billion dollars in Egyptian debt and sends multiple billions of dollars in aid to Jordan and Tunisia in the form of debt cancellation, loan guarantees and trade agreements, Americans are treated like second class citizens – employment benefits are being cut, taxes are being raised, jobs are being exported, and now it will be more difficult to pull emergency loans from 401(k) accounts.

    Somewhere along the way Congress and the Office of the President got their priorities mixed up.


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      1. Do as I say, not as I doo doo.

      2. Don’t let people fool you into investing into a 401k. It’s a scam. I max out the loan on my 401(k) whenever I can… partly because I regret ever investing in one at all. 401ks have more undisclosed fees in them than any other type of brokerage account you can imagine. It should be illegal to have so many fees without disclosing them, but it’s not. You can thank your lawmakers for that. Anyway, I have sunk every penny from my 401k I could into gold and silver, because there’s a good chance that my 401k account will only be worth the piece of paper that my quarterly statement comes on soon.

      3. “Somewhere along the way Congress and the Office of the President got their priorities mixed up.”
        No they didn’t.  It’s just that the people are not the priority.
        Money will go to where those who own the money want it to go.  The Federal Reserve banking cartel owns the money and they do not like the American people.
        If you are out of the corporate system, you are not paying for it anyway.  If you are in the system, you deserve to pay for it.

      4. I took my 401k money out in 2009 and spent most of it on booze and hookers; the rest I just wasted.

        Those that drained their accounts will count themselves lucky in the future.

        Just called the bank today with the question, “If I were to take a 401k loan out to purchase a house, would this, in fact, count toward the 20% down payment required for getting a conforming loan?” They didn’t know, and will call me back.

        Get the money out and into something real folks…land, silver, lead.

      5. I took my 401k money out in 2009 and spent most of it on booze and hookers; the rest I just wasted.

        Those that drained their accounts will count themselves lucky in the future.

        Just called the bank today with the question, “If I were to take a 401k loan out to purchase a house, would this, in fact, count toward the 20% down payment required for getting a conforming loan?” They didn’t know, and will call me back.

        Get the money out and into something real folks…land, silver, lead.

      6. I cashed mine out from my last employer in 2008, I had to wait almost 2 years to get the stinking money because of a clause they had in the agreement. Fortunately I cashed it out before the market tanked. My current employer doesn’t even offer a 401K program, although I wouldn’t want to lend him a dime anyway.

      7. “Recovery.”

      8. I spent most of mine on hookers & boose and got my priorty straight.  The rest I invested in PM’s but lost them when my boat sunk.

      9. Comments… out, sell out…then live below your means. buy nothing but the bare necessities required to survive.

      10. That’s what I keep telling my Hooter’s girlfriend. 

      11. Not my girlfriend, hers.  She’s the smart one.

      12. Anonymous, I used to originate loans for JP Morgan Chase. One of the questions on a loan application is “is any part of your down payment borrowed from other funds?”, therefore, the banks definitely want to know. Some programs allow you to borrow a portion of your down payment from a 401k or a friend or relative and other ones are very strict about letting you do that. However, you don’t even have to tell them where the money is coming from if you don’t want to. All they want to know is if you are going to have additional payments to your mortgage in the future, but that’s none of their damn business. They should underwrite your file according to the current debts that show up on your credit report, and nothing else. The key to getting away with this is to borrow the money at least 3 or 4 months before you make your purchase. That way, when they ask you for your last 2 mos bank statements the money will have already been in your account. If they see a large amount of money going into your savings account a month before you buy the home they are going to want to know where that money came from.

        Ok, that’s my mortgage fraud lesson for the evening.


      13. Who is we oreo cookie?  You want to control the Middle East and your ears are too big.

      14. lairs & thieves, you don’t know whats in store

      15. Jesus said something about giving Ceasar what was his and God what was his….seeing how FRNs belong to ceasar,I can see how they can do what they want to with them,and seeing how all the gold and silver belong to the creator seems to me it would make sense to do our business with each other in Gods currentcy and let them have their FRNs…I think our founding fathers understood some very basic and fundimental truths that we have allowed the PTB to hide from us,at least from society as a whole….just a thought.

      16. Hookers = Honest Dating. I did the same thing, cashed everything out. Bought Land, Guns, PM and Supplies. I did blow a little on a mid life crisis Mercedes. (25 Years Married, I deserved it. After she left.) But the rest I am blowing on Bozze, hooker and anything else these girls can talk me into. Best chose I every made. Live life that is what we are suppose to do. 

      17. Can’t do anything with mine except stop making deposits into it. My husbands on the other hand allow loan and we have borrowed it to the hilt. We paod off a home loan and bought PM’s with it. Figuarded that way when the time came for the Govt to get their greedy hands on it there won’t be much left.

        REB….I have a question for you….have you (or any of you) heard about the Lakota tribe that is using PM’s as currency? I’ve been trying to find out more about this.  

      18. Sorry for the mis-spelling. Typing in the dark.

      19. If you are under the age of 55 and you close out your 401k, you will pay a 10% penalty on top of the mandatory 20% income tax that will be withheld. This leaves you with 70% of the total amount. I was 58 when I closed out the 401k, so I only paid the 20% income tax.

        Does anyone honestly feel that the US$ will be worth much more than the paper that it’s printed on on the near future? I have more than recovered the 20% income tax withheld when I closed out the 401k and actually made more money besides on the alternative investments that I have made. The best part being that what is mine is now under my sole control and in my physical possession.

        Everyone has to ‘row-their-own-boat’ and make the best informed decisions that they can for themselves. If you have a 401k, seriously read the wad of papers that you receive from the plan every year. Check out exactly what the outrageous fees and service charges are that you pay to the administrator of your 401k plan. It will blow your mind and really piss you off.

        A married couple that my wife and I know both had 401k plans through their respective employers. Both plans were administered through the Principal Financial Services Group. In 2008 this couple lost in excess of $60,000.00 in the value of their 401k plans. But guess who made money?? The Principal Financial Services Group; that’s who!!!

        Seriously look at your own 401k plan critically and in light of the events taking place in the world around you; then make the best informed decision as it related to your own personal situation.

        God Bless & good luck to all

      20. @Schaef
        “Ok, that’s my mortgage fraud lesson for the evening.”

        A matter of perspective, I suppose.  I believe lying to the devil is not, in fact, wrong.

      21. Preach it, RafterMan. Preach it!

      22. I never had an 401k, but did have IRA and a SEP-IRA ( self employed ).  Took all of them out in 03/04, paid the taxes/penalty, and bought silver at 6.50, so that’s about a 6 fold return on that compared to the crappy “good growth stock mutual funds with a ten year track record” ( to quote Dave Ramsey ) that have done almost nothing in the same time period, and actually lost ground if you factor inflation into the equation.
        The last IRA I had, a Roth, I took out penalty free as soon as I hit 59 1/2 and spend on solar panels, and the ROI I see every month on electric bills I don’t pay.

      23. Appears that the Senators see the hand-writing on the wall.
        Do you really think that the asset value of your 401K is available as digitized money? Or actual cash? Are you all nuts? A 401K is a derivitive; you bought shares of a pool/pools of whatever. So the pool has to cash you out and at the same time find a buyer for your share. It takes time. Too much pressure from loans against the pools and it all collapses. Then there is the question of each pool’s supposed valuation; rigged or not, however if it is a large pool any large draws against it could alter the markets.

        Everything is connected to everything.
        Everything has to go somewhere.
        There ain’t no such thing as a free lunch. TANSTAAFL

      24. Someone has to lose before there are winners.

      25. This little voice in my head kept saying “cash it all out and go to Vegas” After ignoring the voice for months I finally gave in and did it.
        When I got to Vegas the little voice said “go into the casino to the roulette wheel” So I did.
        Standing by the wheel, the voice said “put it ALL on number 23” I ignored him for several minutes but finally gave in. I bet it all on 23. The wheel spun…the marble rolled…and landed on 16!
        The little voice said “oops!”

      26. Yeah, last year I decided I didn’t want to be in business with the gooberment any more so I took an early distribution on my entire 401k. Lots of taxation but hey, 2/3 of the 401k came from my employer (they were very generous), so the way I see it ‘easy come, easy go’ 😉
        It’s all under my mattress now and I pull some out whenever my brazilian blowout comes due. Oh yeah, and I bought iphones for my two toddlers. They’re very talented.
        Nothing to see here. No PM’s. Move along, you fascists.
        (LOL @ Tina. “Figuarded” is a great word!)

      27. Tina…….Ive heard about it,looked into some of my old files and found this article by my friends at ”Restore the Republic” which I will paste here,it is possible its out there on the web somewhere still but as I have it Ill just do it this way.I will also add the contact info I have on file…..DISCLAIMER I am not endorsing this bank or anyone involved by including this info,they may be fine folks…they may be …well you know….thanks! 
        I have a friend (who is heavily involved in the fight to restore the republic in the political areana)…he made alot of maple syrup this spring and sold it to friends in SC(all of it…gallons) for silver….he told me the other day he had no trouble selling it and could have sold more,….I said all that to say that the idea of using PM to trade with others is still alive and is gaining steam…its not going away anytime soon, and there is no reason we cant work it out amoungst ourselves to use it. ARTICLE BELOW
        People of Lakota Launch Private Bank for Only Silver and Gold Currencies
        Tagged with: baiout    banking    FED    privacy    silver

        Hill City, Lakota – November 24, 2008 – In a stunning development, the Free & Independent People of Lakota announced today the introduction of the world’s first non-reserve, non-fractional bank that accepts only silver and gold currencies for deposit.
        People of Lakota Launch Private Bank for Only Silver and Gold Currencies
        “Today is a great day for us, a day that we begin to exercise our rights as a sovereign people with strength and pride,” comments Canupa Gluha Mani, Tetuwan Council Judicial Member of the Cante Tenza “Strong Heart” Warrior Society.  Mani’s 2500 member warrior society has contracted to provide private security services for the Free Lakota Bank.
        “We invite people of any creed, faith or heritage to unite in an effort to reclaim control of wealth.  It is our hope that other tribal nations and American citizens recognize the importance of silver and gold as currency and decide to mirror our system of honest trade.”  Mani, also known as Duane Martin Sr, is a member of the delegation that declared Lakota independence on December 17th, 2007.
        The launch of the Free Lakota Bank is also an incredible victory for StrikeForce Technologies, the access control experts providing depositor Out-of-Band Authentication.  As the Free Lakota Bank does not require a name, photo identification or social security number to transact, StrikeForce’s technology met the challenge of limiting fraud without requiring controversial biometric technology.
        The People of Lakota invite depositors to establish accounts and invest in the Free Lakota Bank’s General Investment Fund, the fund it uses to develop profitable free-market enterprise inside Lakota territory.  Mani comments that the nation despises donations and charity, and instead insists instead on “earning our wealth by creating value for those that place their faith and trust in our system.”
        The Free Lakota Bank issues an American Open Currency Standard Approved currency, making it readily accepted for trade by over 10,000 merchants and businesses across the continent.
        For more information, visit the Free Lakota Bank website at
        Canupa Gluha Mani
        [email protected]
        P.O. Box 512
        Hill City, LK 57745

      28. LOL….isn’t it though. It is amazing what you can type in the dark.

        I’m being serious for a minute…..have any of you heard about an Indian Tribe that has gone to a PM standard for all their transactions? The Lakoto tribe. I saw a advertisement on TV about a silver coin they were selling (1-oz .9999 silver @ 39.95) so I googled it and found a lot written on this tribe. Has anyone else heard about this…..What is this really about?

      29. I really don’t know, . . . but it appears that the Lakoto nation’s actions could be a presage of some big moves in the (probably former) USA.

      30. Don’t pay money into a 401k unless your employers gives you a big match. Also check for employer rules “vested only after 3 years” or similar.
        It’s everyone’s choice whether to close out with 10% penalty or not – but for sure do a close out instead of taking a loan on your 401k!

      31. The proposed limit on loans is only to keep people from taking loans and not having to pay them back when the USD collapses. The next step is probably a manufactured crisis to herd everyone into GRAs with forced contributions.

      32. Thanks REB for the info.

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