Trent Charlton knew the risks when he borrowed $10,000 from his 401(k) and cut his retirement savings in half.

But Charlton, a 40-year-old account executive at an Irvine, Calif., trucking company, said he had little choice because he and his wife could not keep up with monthly expenses after American Express reduced the limits on three credit cards.

As home prices fall and banks tighten lending standards, more people are doing the same thing: raiding their retirement savings just to get by and spending their nest eggs to gas up SUVs, pay mortgages or put food on the table.

But dipping into 401(k) accounts can carry risks because defaulted loans and hardship withdrawals are taxed as income and are subject to a 10 percent penalty if the worker is under 59 years old. That means if the trend grows, many Americans will risk coming up short on retirement savings or may have to rely on an overburdened Social Security system.

"People who take out a loan or withdrawal are adding to a looming retirement crisis over the next 30 to 40 years," said Eric Levy, a partner at global consulting firm Mercer. "And what implications will that have (for) our economy?"

Some of the nation's largest retirement plan administrators, such as Great-West Retirement Services and Fidelity Investments, are seeing double-digit spikes in hardship withdrawals and increases in loan requests, a sharp departure from levels that traditionally varied little.

Administrators say consumers are using retirement savings to pay for unmanageable mortgages, maxed-out credit cards, and costly utilities and groceries.

Charlton and his wife used the retirement money and $7,000 from savings to pay down their credit card debt. They also cut monthly expenses by pawning a diamond ring and selling camera equipment he owed money on. And he's looking for someone to take over his $550 monthly payment on a gray BMW 335i he leased last April.

Charlton said his goal is to pay off the 401(k) loan in two years. He has not decided whether he will contribute to the plan during that time.

"I made the best decision I could," he said. "I keep hearing about bankrupting your future retirement. But I feel like it's far enough away that I'll be able to save up enough."

Charlton's predicament arose as lenders are taking steps to rein in credit because more consumers are missing payments on mortgages, credit cards and loans. Borrowers are finding their credit limits suddenly reduced and low-interest cards hard to come by. Mortgage lenders have also reduced limits on home-equity lines of credit.

Meanwhile, jobs are harder to find, and consumers are getting pinched by higher food and fuel prices.

Consumers who tap their retirement accounts can take a loan from their 401(k) accounts worth up to $50,000, or 50 percent of the amount invested, whichever is less. There are no tax consequences for a loan in good standing. But if a borrower defaults, the loan is considered a withdrawal and subject to the same tax penalties.

If Charlton repays his loan and continues making contributions, his account balance at 62 will be nearly the same as if he had not borrowed, according to projections by Alicia Munnell, director of The Center for Retirement Research at Boston College.

But if he repays the loan and suspends contributions for five years, his final account balance would fall by 18 percent.

Based on current savings rates, the center estimates that 43 percent of households risk not being able to fund the same standard of living during retirement as they have in their working years. That percentage increases to 49 percent for Americans between 36 and 43 whose main retirement plans are 401(k) accounts, not employer-funded pension plans like older generations.

Some plans don't allow workers to make contributions while making payments on loans. Others require workers to wait a set time before contributing again after taking a withdrawal. If the employer matches contributions, workers are taking a double hit.

"The idea of paying yourself back is not necessarily a plus," said Charlie Nelson, a senior vice president at Great-West Retirement Services. "For a loan, you're paying back using after-tax dollars, so generally, over time, you won't earn as much."

Great-West Retirement Services, the unit of a Colorado-based insurance company that manages 3.5 million accounts for employers, said hardship withdrawals jumped 14 percent last year, and the number of loans rose almost 13 percent, with a dramatic increase occurring in the fourth quarter.

Fidelity Investments, which jockeys with Vanguard Group as the nation's largest mutual fund provider, said it saw withdrawals surge 17 percent in 2007, with record withdrawals in December, but a smaller increase in loans. Vanguard saw no change.

"What we're talking about is people spending their retirement now and lowering their standard of living when they retire ... People aren't willing to make some of the tougher choices in the short-term to make a better future for themselves," said Stuart Ritter, a certified financial planner with T. Rowe Price.

In the last three decades, 401(k)s have replaced traditional pension plans as employers' preferred retirement offering, which has shifted the responsibility of saving to employees from employers. Only 32 percent of workers ages 36 to 43 have any coverage by a pension plan.

If Americans find they didn't save enough, they may have to work longer and shorten their "golden years" of retirement, Munnell said. Otherwise, workers will have to cut corners and settle for a frugal retirement.

Theresa Perry, who manages benefits for the firm PinkSlip LLC in San Francisco Bay, said she's been surprised by the number of people using hardship withdrawals to make payments on so-called "piggyback" loans, which are home-equity loans wrapped with a first mortgage to allow borrowers to fully finance a home.

"I've been doing benefits administration for 15 years and using 401(k)s to keep mortgage payments under control is new to me," Perry said. "They're not taking money out to purchase homes anymore. They're taking money out to keep the home they already have."

Ritter worries that mortgage or other financial troubles will persist for many consumers, even after they tap retirement funds.

But for Americans who are struggling to keep afloat in a slumping economy, today's money problems are more urgent than a far-off retirement date.

Said Charlton: "We have to take care of ourselves now and put retirement on the back burner."