4 Questions to Ask Before Borrowing from Your 401(k)

It may sound like an appealing option since you’re paying interest to yourself rather than a bank, but 401(k) loans do come with risks and restrictions

January 3, 2012 RSS Feed Print

4. Am I willing to absorb the opportunity costs? Taking money out of your retirement account means you'll miss out on the opportunity for that money to grow. "You're suffering a loss of earnings whenever you take money out of an investment account," says Adams. "When you look at the long-term consequence of taking that money out, it can be a bigger dent in your retirement savings than you would think." Plus, Adams adds, "If you're not contributing to your 401(k), you're not getting matching funds from your employer." Use a 401(k) loan calculator to get a ballpark figure on how much borrowing from your 401(k) could impact your retirement account.

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Tags:: 401(k),; retirement,; money

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can you pay off your 401 k loan early

Buddy of SC 8:55PM February 06, 2013

I'M BENEFICARY OF A 401K SENT IN DEATH CERTIFATE AND W9 ASK FOR THE MONEY I'M 58 HE WAS 71 YRS OLD HOW LONG TIL THEY SEND ME THE MONEY

rick of NH 2:26PM January 15, 2013

I suggest reading investopedia's "Sometimes it pays to borrow from your 401k," if your thinking about a 401k loan. This "double taxation" myth is a case of epidemic misunderstanding. Granted it's a very difficult thing to wrap your mind around, but if you do the math it's a wash with the IRS. The only portion you will pay taxes twice on is the interest you pay yourself-which one should try to keep to a minimum. If we were allowed to put money in a 401k pretax, take it out tax free and then put it back without paying tax everyone would be using it as an expense account where you could pay your expenses tax free.

Jstew of CO 9:09PM November 18, 2012

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4 Questions to Ask Before Borrowing from Your 401(k)

It may sound like an appealing option since you’re paying interest to yourself rather than a bank, but 401(k) loans do come with risks and restrictions

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