We all know that loans and hardship withdrawals seriously deplete savings in retirement. A new infographic from Fidelity based on data from more than 20,000 plans and 12.3 million participants illustrates the point in a way that might help participants think twice. Salient facts:
• 1 in 9 participants take out a loan every year; the average amount is $9,000.
• 2.3% take a hardship withdrawal; the typical participant is 35-44 years old and makes $30,000-$50,000 annually.
• 50% of borrowers are “serial offenders.”
• Borrowers defer less — 6.5% vs. 8.4%.
• A typical participant who borrows or withdraws will have almost 200% less in their account than a participant with the same deferral rate over 10 years.
While it might not make sense to get rid of loans, limiting the number of outstanding loans and showing their harmful effects might be next best.
