It seems counterintuitive, but People may in fact contribute more to their retirement accounts if they know that they can get to their money in an emergency or for large-scale purchases such as a first home.
My co-authored research shows that this savings effect resulting from the ability to borrow from one’s 401(k) plan, though, is substantially weaker among households that already have difficulty managing their other finances in areas such as a mortgage and credit card debt than it is for households that manage their finances well in these other areas.
The above excerpt was originally published in Forbes.
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