Would you still put money in a tax-advantaged retirement fund if you couldn't touch it until you retired?

And when I say you couldn't touch it, I mean you couldn't take out loans or withdraw funds under any circumstances.

If Congress were rewriting the rules for 401(k)s and similar retirement plans, that's what the Washington-based Pension Rights Center would recommend. Why this harsh stance from a consumer-oriented group that works hard to protect and promote retirement savings?

A new study has found an increasing number of employees are raiding their retirement funds by taking out loans against their 401(k) accounts. Strangled by debt and rising consumer prices, workers are turning to these plans as the only stash of cash they have.

"The result is that families leverage their future retirement security to ease their present financial insecurity," wrote Christian E. Weller and Jeffrey B. Wenger, who authored "Robbing Tomorrow to Pay for Today: Economically Squeezed Families are Turning to Their 401(k)s to Make Ends Meet." The report was issued by the Center for American Progress.

Last week, the U.S. Senate Special Committee on Aging held a hearing to examine this trend and hear solutions on how to reverse it. The CAP report was released at the hearing.

In it, researchers found that over a 15-year period, loans against retirement savings accounts increased almost fivefold in inflation-adjusted terms, to $31 billion in 2004, up from $6 billion in 1989 — "an increase of almost 400 percent." Between 1998 and 2004, an average of 12 percent of families with 401(k) plans borrowed from them.

Although much of this money was paid back, the drain from accounts is significant. Even with a fairly modest loan amount of $5,000 in 2008 dollars, a worker's retirement savings could be substantially reduced.

For instance, a 401(k) plan participant who takes out a loan to smooth over a rough patch, then makes only the loan payments, reduces the total retirement savings between 13 percent and 22 percent, the report noted.

The study also found that increasingly, middle-income families are raiding their retirement funds.

"With other venues to borrow money, particularly home equity lines, closed off due to lower house prices, tighter credit standards and slower income growth, families are turning increasingly to the easily accessible loans from their 401(k) plans," Weller and Wenger wrote.

The increase in 401(k) loans is so high because this money is so easy to borrow. If your plan allows such a loan, you can borrow $50,000 or one-half of the vested balance from your retirement account, whichever is lower. The loan has to be repaid in five years or less, except for loans that have been taken out for the first-time purchase of a home. That loan can be repaid over a period of up to 15 years.

Additionally, the interest rates on 401(k) loans are generally very reasonable. For instance, in 1996, about 70 percent of the 401(k) plans that allowed borrowing charged an interest rate equal or less than the prime rate plus one percentage point, while less than 10 percent charged an interest rate equal to the local bank's lending rate, the report said.

Here's what's wrong with borrowing from your retirement fund, as laid out in the report: