Nearly $2T in American Retirement Savings Can Be Protected by Adopting Auto-Enrolled 401(k) Loan Protection, New Research Shows

EBRI Study

Analysis confirms the positive impact of protecting American workers from harmful defaults

DALLAS, April 5, 2022 /PRNewswire/ — A remarkable $1.96T in retirement savings can be preserved if employers automatically enroll employees in 401(k) loan protection when they borrow from their defined contribution retirement plans, according to new research conducted by the Employment Benefit Research Institute (EBRI) and Custodia Financial. The study illustrates the  severe damage that 401(k) loan defaults have on retirement savings, as well as the positive impact of 401(k) loan protection on retirement outcomes.

In one of the most extensive analyses of its kind, EBRI calculated the impact to retirement outcomes of adopting auto-enrolled 401(k) loan protection across over 27 million employee records from primarily large and medium-sized retirement plans. According to the analysis, researchers found that automatically enrolling employees in a 401(k) loan protection program would significantly improve retirement outcomes by reducing loan defaults and plan leakage. A typical 401(k) loan default in the study will cost the average borrower aged 25-34 more than $150,000 during their career, according to the EBRI report. Today, 90% of employers include loans in their 401(k) plans, and 20% of plan participants typically have loans outstanding, providing employers incentive to prevent loan defaults and secure meaningful savings for employees.

“Loans provide 401(k) participants with access to their retirement savings during emergencies. Unfortunately, when employees leave their jobs, they default and incur taxes, penalties, and often cash out their entire account,” said Custodia Financial CEO Tod A. Ruble. “Loan default losses don’t have to happen, and this research clearly shows the need for employers to safeguard their workers with auto-enrolled 401(k) loan protection. Protecting loans will reduce America’s retirement savings shortfall by trillions of dollars.”

According to the EBRI report, trillions of dollars in plan assets are lost to loan defaults and the cash outs that follow. Since most loan “leakage” occurs after termination, protecting participant loans during this critical transition is necessary to prevent losses and strengthen retirement security. Worse yet, a recent AON study shows the problem is even more harmful for underrepresented minorities, who borrow from retirement plans and default at a much higher rate than the average saver.

“Many Americans face sizeable retirement deficits. The Employee Benefit Research Institute’s Retirement Security Projection Model(R) provides invaluable insights as to how policy and plan features such as loan protection can make an impact on these deficits,’” said Lori Lucas, EBRI President and CEO. The full EBRI 401(k) loan analysis can be found here:

About Custodia Financial

Custodia Financial’s sole purpose is to safeguard America’s retirement security by preventing 401k plan loan defaults. Custodia’s Retirement Loan Protection is the only loan program that automatically and measurably improves retirement outcomes. To learn more, please visit

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