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Strategies to Manage Retirement Plan Loans

Enshrining these in a well-crafted loan policy statement can help plan sponsor clients take control of leakage and excess early withdrawals; like any stated compliance policy, what is written must be followed.

While the retirement plan industry is primarily focused on helping participants invest more money, it is equally important to prevent them from taking out loans or hardship withdrawals, says Snezana Zlatar, senior vice president and head of full service product and business management at Prudential Retirement in Woodbridge, New Jersey.

“Dipping into retirement savings early, suspending contributions to 401(k) plans, or both, can reduce workers’ retirement savings on average by 14%, delaying retirements and costing employers more for salaries and benefits as their workforce ages, according to MassMutual’s analysis,” says Tom Foster, national spokesperson for the firm’s workplace solutions unit in Enfield, Connecticut. And the younger the participant, the greater the impact because of their savings time horizon.

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