A miserable twist of the knife: Americans are increasingly defaulting on pension loans, and the taxman and plan manager make money out of it all.
The 401(k) plan is a contribution-based pension for employees. Many such plans allow loans, often with restrictions as to their purpose (e.g. for college fees, medical expenses or housing); but Leo Kolivakis relays reports of an estimated $37 billion in annual defaults, as the great financial crisis continues to claim victims.
The worst of it is, when the borrower defaults, income tax is charged on the loan - plus (often) an extra penalty (presumably to the benefit of the plan manager):
"This can take you from a $6,000 loan to a wipe-out of $10,000 from your 401(k savings) ... and this is happening to people at the very worse times of their personal and financial lives."
When it rains they take away your umbrella.
ReplyDeleteBanks were ever thus, and the State is not your friend.
No surprises here.
This and, I suspect, even worse
ReplyDeleteYet I read at Bloomberg: "Now the economy's turned the corner ..."
ReplyDeleteReally?