Wells Fargo reported in April that not only did more people take such loans in the fourth quarter of 2012 than in 2011, but that the average amount taken increased.

According to Wells Fargo, 28% more people took out 401(k) loans in that quarter and the average amount climbed 7%, from $6,662 to $7,126.

And, now, nearly one in five 401(k) account holders (19.2%) have an outstanding loan on their retirement accounts.

And while trying to help with college tuitions is one reason for this, many people are tapping their account for hardship reasons.

While such loans might be necessary, loans for vacations, car repairs and other reasons are best avoided, industry experts say.

According to one estimate, Americans are making more than $70 billion in annual withdrawals from their retirement accounts.

One of the problems might be that borrowing from retirement savings has few obstacles.

“It's pretty easy to get access,” said Joe Ready, director of institutional retirement and trust for Wells Fargo. “It's almost like a credit card.”

Add to that the notion many people have that they are only borrowing from themselves, so it's no big deal.

That notion runs into problems though for a couple reasons, one having to with the terms of such loans and the other owing to the behavior toward their retirement accounts by those who borrow.

“It should be the account of last resort,” Ready said. “But people think, “It's my money and I'll pay myself back. But it's a big payment.”

Not only is the payment big and taken out of each paycheck, but the full amount is often due within 30 days if the employee leaves a job. That can create a new hardship for someone who is already financially stressed.

And then there's a double whammy of sorts that sets in while the loan is being repaid.

“A lot people drop contributions to their plan while repaying a loan,” Golladay said.

The question facing plan sponsors, advisers and workers is how to navigate the daunting financial challenges faced over the years in raising a family, paying for college, meeting medical and other crises while still putting away enough money for retirement.

And then there's the “sandwich generation:” people in their 40s and 50s who have financial obligations to their children as well as their aging parents.

Navigating all these obstacles to saving is not something that is easy to do alone.

Plan sponsors, according to their institutional advisers, are always on the lookout for the best ways to encourage a higher savings rate while discouraging borrowing against 401(k)s.

The government has played a role in the past and could do more, policy experts say.

“The Pension Protection Act in 2006 has done a tremendous amount to boost retirement plan participation, savings and overall retirement readiness,” said Nevin Adams, director of educational and external relations for EBRI. “That's one clear example of what governments can do to help, as would be any initiative to encourage more employers to offer programs, since it's clear that access to these plans makes a difference.”

And companies can do more to shape 401(k) rules to encourage more responsible saving. Ready said the one thing that would help is making access to loans more difficult.

“Some of the dialogue with clients who do not have provisions for loans has shown that has not stopped employees from participation,” Ready said.

In other words, people will still contribute to a 401(k) even if they know they cannot get a loan from it except for the direst reasons.

Employers can do more, Adams said.

“They can help by offering a plan, by providing a match, by incorporating automatic enrollment and contribution acceleration programs,” he said. “And by making available professional advice and/or professionally managed accounts to help individuals make better savings decisions.”

Golladay agrees and adds an idea to encourage savings.

“What I would encourage employers to do is put inertia on the employees' side,” she said. “Does your plan have automatic features (for contributions)?”

According to Ready, many employers find that a certain percentage of employees, about 20 percent, won't enroll unless it's done for them.

And for the vast majority that does contribute to their 401(k), the trick is to get them to up their savings.

Some ideas being discussed or tried include: lowering the amount of matching contributions for those with a low percentage diverted to savings while raising the match for those who save more; and increasing employee contributions by 1 percentage point each year.

The bottom line is that saving for retirement requires the full attention of the investor. A plan for saving for daily expenses, college funds and life after work is essential.

This article was originally posted at BenefitsPro.com, a sister site of Credit Union Times.

“There are some obvious advantages to having discrete savings set aside for different purpose,” Adams said. “Advisers, in helping their clients prepare a holistic financial plan can help folks consider those potential needs and the possible advantages. The best savings plan generally starts with savings goals.”