Custodia Financial has developed an insurance solution, Retirement Loan Protection (RLP), designed to protect savings when defaulting on retirement loans.
According to research from the National Tax Journal, 86% of employees with outstanding loans default when changing jobs and two-thirds of those cash out their entire retirement accounts.
Defaulting on these loans could result in a loss of retirement savings. According to Custodia Financial, a single defaulted $8,500 loan for a 42-year-old can translate to over $400,000 in lost retirement savings due to missed compounding.
With the Retirement Loan Protection program, if a participant were to become unemployed, Custodia would step in on the participant’s loan payments until they find a new job. Plan sponsors would pay for the product, which would be immediately available to participants in the case they lose a job. There is no technology integration window or enrollment period.
“Frequent job changes, economic volatility, increased layoffs, and higher interest rates threaten the financial stability of many Americans,” said Tod A. Ruble, CEO and co-founder of Custodia Financial. “Employers are anticipating increased loan utilization and defaults, making retirement savings protection even more critical.”
SEE ALSO:
- 401(k) Investors Happy With Employer Education, One-Third Want Help
- Auto-Enrolled 401k Loan Protection Has Potential to Save $2 Trillion
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.