Automatically Enrolled By Employer For 401(k)

Photo ©iStockphoto.com/Ildo_Frazao More Savings, More Debt Do you participate in a 401 plan at work? As a greater percentage of a paycheck is diverted to retirement funds, families don't always adjust spending to reflect the lower take-home pay, and greater debt follows unwittingly. However, the study found no evidence suggesting that auto-enrolled 401 participants accumulated more of this type of debt than 401 participants that opted in to their plans. Auto-enrolled employees acquired an average surplus of $3,237 in their 401 account compared to those who opted in, but they also acquired an average $4,131 in debt during that time. You could apply a 401 loan to pay off high-interest rate debt – but, even if you pay the loan back promptly, you can't recover the lost interest income and long-term positive effects of compounding.