Senators seek to cap loans from 401(k)s

Legislation would set limits on the number of loans that can be taken from 401(k) plans and ban 401(k) debit cards.
JUL 16, 2008
Legislation setting limits on the number of loans that can be taken from 401(k) plans as well as prohibitions on 401(k) debit cards is to be introduced today by Senate Special Committee on Aging Chairman Herbert Kohl, D-Wis., and Sen. Charles Schumer, D-N.Y. Loans taken from 401(k) plans are increasing in number as well as size, according to a study released at a Senate hearing today. The legislation “will protect people’s nest eggs from companies peddling debit cards that deplete their retirement savings with a simple swipe,” Mr. Schumer said in a statement. Loans from defined contribution plans rose sharply, increasing almost fivefold in inflation-adjusted terms to $31 billion in 2004 from $6 billion in 1989, according to a report, “Robbing Tomorrow to Pay for Today,” released at the hearing by the Center for American Progress Action Fund of Washington. While money is withdrawn from retirement accounts it doesn’t earn any returns, according to the report. Over the past few years, many account holders have used their retirement savings plans to “bridge the gap between slow income growth and rapidly rising prices” for houses, food, energy and health care, according to the report. Loans from retirement savings plans can substantially reduce retirement income, according to the report. “401(k) and similar defined contribution plans were created to ensure that people would have adequate savings for retirement, not a source of credit to use casually,” Mr. Kohl said in a statement.

Latest News

RIA dealmaking accelerates as three firms hit AUM milestones
RIA dealmaking accelerates as three firms hit AUM milestones

Wealth Consulting Group, Coastline and Maridea report fresh capital, acquisitions and asset growth as advisor M&A keeps climbing

VastAdvisor closes $1 million SAFE round from advisor-side backers
VastAdvisor closes $1 million SAFE round from advisor-side backers

Carson Group's Dani Fava, Jason Pereira of Woodgate Financial, and Sally George of Convergency Partners led the raise as the growth-tech startup builds out its AI platform and leadership bench.

Wells Fargo adds three advisor practices as recruiting rebound continues
Wells Fargo adds three advisor practices as recruiting rebound continues

New teams from William Blair, Ameriprise and UBS bring more than $560 million in combined client assets to the firm's employee and independent channels.

UBS will pay advisors 'handsomely' for banking starting next year
UBS will pay advisors 'handsomely' for banking starting next year

Regulators this year approved UBS Bank USA’s conversion to a nationally chartered bank.

SEC accuses Tricolor executives of hiding $800 million collateral hole
SEC accuses Tricolor executives of hiding $800 million collateral hole

How a subprime lender’s car-loan bonds allegedly unraveled before bankruptcy.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income