There have been plenty of columns written around the country lately about the rise in 401(k) loans and whether it makes sense to take one.

In conversations over the past couple of months with plan administrators such as Fidelity and Schwab, I’ve asked if they’re seeing an uptick. The answer was always no.

Now, Investment News has a story featuring new data from Hewitt Associates and a survey of other administrators that say loans have actually decreased a few percentage points, not increased. Although hardship withdrawals are up with the money going to help people stave off foreclosure.

The story reminded me of when I followed three families trying to get out of debt for a year. One family had a 401(k) with maybe $40,000 and a few grand in an IRA. And they did not want to touch them. They worked harder, cut expenses, hit the food shelf from time-to-time. But they did not want to tap that 401(k).

I don’t think they’re alone.  Especially in economically challenging times, people do not want to use retirement money to live today. Also, people worry in uncertain times that if they lost their job, they wouldn’t be able to pay the loan back.

How about you? Do you think it makes sense to keep money in a 401(k) even if you desperately need it today? Or do we treat 401(k)s as sacred when really paying a 10 percent penalty is a small price to pay to put food on the table?

This entry was posted on Tuesday, September 2nd, 2008 at 11:21 am and is filed under retirement, saving. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.