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Borrowing through the Future: 401(k) Loans and Their effects The loans people take from their 401(k) pension plans, why they take these loans and what happens when these borrowers leave their jobs in a new paper titled, “Borrowing from the Future: 401(k) Plan Loans and Loan Defaults, ” Olivia S. Mitchell, Wharton professor of business economics and public policy, analyzes. The paper had been co-authored by Timothy (Jun) Lu from Peking University, HSBC Business class, and Stephen P. Utkus and Jean A. Younger, both from Vanguard Center for Retirement analysis. Knowledge@Wharton asked Mitchell to close out her talk and research about its implications for company professionals, customers and regulators. An edited transcript of this discussion follows. Knowledge@Wharton: Please briefly describe your quest. Olivia Mitchell: My research in this region happens to be centering on the loans that individuals just simply simply take from their k that is 401 plans. It’s quite common for companies to permit loans through the retirement benefits, as well as in reality, we realize that at any time, about one 5th of a loan have been taken by all workers. More than a five-year period, up to 40% take loans. Therefore it is a practice that is common. We now have investigated why individuals simply simply just take loans, what the results are if they do, as well as in specific, what the results are once they terminate their jobs.

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