(Download) "Borrowing from Your Employer-Sponsored 401(K) Retirement Plan (At Home)" by The Virginian Pilot # eBook PDF Kindle ePub Free
eBook details
- Title: Borrowing from Your Employer-Sponsored 401(K) Retirement Plan (At Home)
- Author : The Virginian Pilot
- Release Date : January 29, 2008
- Genre: Reference,Books,
- Pages : * pages
- Size : 62 KB
Description
pros\uE034 It's convenient. There is no credit check or long credit application form. Some plans only require you to make a phone call, while others require a short loan form.\uE034 There is a low interest rate. You pay the rate set by the plan, usually 1 or 2 percentage points above the prime rate .\uE034 There usually are no restrictions. Most plans allow you to borrow for any reason.\uE034 You are paying the interest to yourself, not to the bank or credit card company.\uE034 The interest is tax-sheltered. You don't have to pay taxes on the interest until retirement, when you take money out of the plan.\uE034 You choose where the money comes from. The advantage of being able to choose which investment option you will sell in order to obtain the funds for your loan is that you can leave untouched those investments with the best performance.cons\uE038 Smaller contributions. Because you now have a loan payment, you may be tempted to reduce the amount you are contributing to the plan and thus reduce your long-term retirement account balance.\uE038 Loan defaults can be harmful to your financial health. If you quit working or change employers, the loan must be paid back right away. It's not uncommon for plans to require full repayment of a loan within 60 days of termination of employment. If you can't repay the loan, it is considered defaulted, and you will be taxed on the outstanding balance, including an early withdrawal penalty if you are not at least age 59. There may be fees involved.\uE038 Interest on the loan is not tax deductible, even if you borrow to purchase your primary home.\uE038 You have no flexibility in changing the payment terms of your loan. home sweet loanBut before you think that borrowing from your employer-sponsored 401(k) retirement plan (or a 403(b) if you work for a school or nonprofit) is the ticket to buying a home, this strategy has both pros and cons. On the plus side, the loan principal, along with the interest on the loan, is paid back to you and is lower than what a bank typically charges. Also, there is no credit check required since you are lending yourself the money