Borrowing from your 401(k) is robbing you of a comfortable retirement. Many folks treat their 401(k)’s like a personal ATM. Why is it a bad idea to withdraw cash via a 401(k) loan from your retirement to pay for things like your kids’ college, home improvement projects, a vacation, or pay off debt? You’re essentially robbing your future self of a comfortable retirement when you do this.
401k loans are triple trouble!
- First, you have a loan payment coming directly out of your paycheck. For many people, that causes them to reduce the amount of money they’re contributing to their 401k.
- Second, the amount that you borrow is unplugged from your investments and you’re missing out on growth.
- Third, if you leave your job – whether you quit, get fired, or laid off – you will owe the balance of your 401k loan within 60 days or face penalties and taxes.
So please don’t rob your retirement by taking out a 401k loan!