Letting Employees Raid Their 401(k)s Could Actually Encourage Savings
It seems counterintuitive, but making it easier for people to access the cash in their 401(k) plans can lead to more savings. 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. Click here to view the full article.
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