Borrowing Money From A 401k, TSA Or Other Defined Contribution Retirement Plan
Advantages & Disadvantages To Borrowing From Your Retirement Plan
Next » « Previous2/5
Let's take a look at some of the pluses or minuses associated with borrowing from a retirement plan:
Advantages |
Disadvantages |
You can usually receive the money within a week or two. |
The loan must be paid back within 5 years unless it's used to buy a house. |
You can borrow up to 50% of the vested balance of your account, up to $50,000. |
You cannot borrow small amounts - usually less than around $1,000. |
The rate on the loan is usually reasonably low. Also, there is no penalty for the withdrawal as long as it's paid back on time. |
You must pay interest. The interest you pay on the loan is paid with after-tax dollars, and will be taxed AGAIN when you take a distribution from the plan. |
You can usually borrow for any reason. |
You lose tax-deferred growth on the money that you've taken out of the account.
|
Xxxxxxxxxxxx |
You will have to pay a loan-processing fee. On a small loan, the fee can be a large percentage of the amount borrowed on top of the interest you have to pay. |
Please share how this information is useful to you. 0 Comments
Post a Comment Have something to add to this topic? Contact Us.