The Credit Counseling Professionals

07/27/10

4 reasons NOT to Borrow from your 401(k)

1. until you repay the loan, your portfolio will have a smaller balance...so its potential growth will be smaller. 
2. you must repay the loan in full within 5 years, or it is a 'distribution', incurring income tax and penalties.
3. if you leave your job for any reason, the ENTIRE loan will come due in 60-90 days
4. there may be a fee to take out the loan, and your loan repayments will be made with AFTER tax dollars.

Avoid retirement fund borrowing unless absolutely necessary.  To deal with unexpected expenses, build an emergency savings fund so you don't have to tap your nest egg.

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