Retirement Plan Participants’ Loan Defaults

July 24, 2012 at 11:49 am Leave a comment

Last week, the Chicago Tribune had an article by Walter Hamilton titled “Defaults on 401(k) Loans Reach $37 Billion a Year”. Located at,0,7104613.story, the article discusses the large number of loan defaults in 401(k) plans.  The article also mentions the tax consequences of a loan default. Very few participants probably obtain loans with the intention of defaulting on their loans, but the article is a good reminder of the ramifications of being unable to repay those loans.  In addition, the participant has reduced funds set aside for retirement. Especially for older participants, retirement may be postponed due to the loss of compounded earnings and the resulting shorter time in which to make up the defaulted funds that were not repaid.

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Christine Gurney

A pension professional who shares her thoughts and ideas about the pension world for industry members and anyone else interested.

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