How Do You Borrow From A 401(K)?
The decision of whether to borrow from a 401(k) retirement plan is not an easy one. Some financial advisers say it’s never a good option, while others recommend it under certain circumstances. The truth is, it depends on several factors, and it’s always necessary to calculate the consequences before making the decision. Here are some ways to decide whether to borrow from a 401(k). Consider the reason for borrowing. It is never a good idea to borrow to finance short-term goals or depreciable goods. Among the worst reasons are buying a car, financing a vacation or paying for children’s education. These are the kinds of goals that can and should be postponed or financed from other sources. If the need for cash is legitimate and immediate, look at every other source available before tapping into a 401(k), including student loans, loans from relatives and selling other assets. Find out your company’s policy for borrowing from your 401(K). Usually, the interest rate is lower than prime, and
