Why taking a loan against your 401k is probably a bad idea, from RetireGenX
Retire Gen X
If you participate in a 401(k) or 403(b) retirement plan through your employer, chances are good that you have the option borrow money from your plan.
How 401(k) or 403(b) retirement plan loans work:
- Once your balance reaches a certain dollar amount, you may be eligible for a loan
- When you apply for a retirement plan loan, the administrator spots you the cash
- A portion of your retirement plan money is held aside as collateral until you pay the loan back
- Once you pay back the loan amount, the money held for collateral is made available to you again
Considering a loan from your retirement plan? Ask your HR department for details. Each retirement plan can set the guidelines for loans, within certain limits set by the government. Some plans have pretty flexible loan provisions, while others are more rigid. Some plans only allow loans after your balance reaches a…
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