Home
>
Personal Finance
>
Should You Borrow From Your 401(k) Account?

town car ride to ohare Marengo Park Ridge taxi to Midway Naperville south of 95 limo Midway Lincoln Stretch limo rentals Deerfield travel from O'Hare Carpentersville .. Drug testing

Should You Borrow From Your 401(k) Account?

If you have a 401(k) account, it can be very tempting to borrow from your account especially when your balance is very high and a loan could easily pay off existing debt, fund a home purchase, or pay for college tuition. Before you make the decision to borrow money, there are several things you must keep in mind to avoid risking your funds.

Borrowing from a 401(k) can seem like a risk free loan, especially since you repay yourself with interest. However, there are costs involved that are not readily apparent to the borrower who elects to take out a loan:

1. On the borrowed funds, you lose all tax-favored investment returns. In other words, you are effectively charged extra interest for the loaned funds.

2. Any interest you pay, even though you are paying yourself, is not deductible, but will be taxable to you when the plan pays you back via future distributions.

3. You may have to pay a fee to take out the loan. Add this expense to the loan costs to see if a loan is still cost effective.

4. If you leave your place of employment before paying off your loan, you will be required to pay the loan back in its entirety immediately. If you do not have the funds available to pay back the loan right away, you will then be subject to IRS taxes and penalties which can eat up as much as 30% or more of your borrowed funds depending on your tax bracket. The IRS treats all loans that are not paid back as disbursements.

Yes, a 401(k) loan can help fund life's emergencies, but the hidden costs and fees involved as well as potential taxes and penalties can quickly turn a good thing into a bad move.

Matthew Keegan is the owner of a successful article writing, web design, and marketing business based in North Carolina, USA. He manages several sites including the Corporate Flight Attendant Community and the Aviation Employment Board. Please visit The Article Writer to review selections from his portfolio.

limousine chicago service

In The News:

The Boy Scouts of America is trying to recruit a new generation of kids to join its troops with high-energy, high-tech activities that include thrill-inducing zip lines at a new adventure camp, apps and a television show.

The next iPhone or iPad from Apple is surely around the corner, and Google is getting into everything from cloud computing to car making. But what the cards hold for $100 billion behemoth Facebook is far from clear, experts say.

Rumors of the hairy humanoid known variously as the yeti, bigfoot and sasquatch have persisted for decades. Now scientists are hoping to make more of a case for the creature -- with the help of genetic testing, Reuters reported.

Scotty has finally been beamed up. The ashes of the actor James Doohan, who played Scotty on the 1960s television series "Star Trek," were launched to space this morning (May 22) on a SpaceX Falcon 9 rocket.

Cows are a red herring. The most dangerous potential source for methane release lies underneath thinning permafrost and glaciers in the Arctic. Ecologists have just mapped the seeps where methane is bubbling up, and they found more than 150,000 of them.

At a time when black magic was relatively common, two curses involving snakes were cast, one targeting a senator and the other an animal doctor, says a Spanish researcher who has just deciphered the 1,600-year-old curses.

Presidents Barack Obama and Bill Clinton, U2 frontman Bono and more honored the memory of late Apple founder Steve Jobs Monday in New York City at the 16th annual Webby Awards.

Humans' close relationship to dogs has so far obscured their history so much that it's not yet possible to use genetic data to tease out the details of their domestication, new research indicates.

A Jurassic mom's almost certainly painful death is perfectly preserved in a rare fossil skeleton, one of the many unique items that will go on display in the Houston Museum of Natural Science's $85 million dinosaur hall when it opens to the public June 2. We take a first peek at the exhibit.

A Jurassic Mom's almost certainly painful death is perfectly preserved in a rare fossil skeleton, one of the many unique items that will go on display in the Houston Museum of Natural Science's $85 million dinosaur hall when it opens to the public June 2.

The rise of Kickstarter's crowdsourcing platform means consumers can now vote with their dollars, investing in unique new projects that they believe in, from smartphone watches designed from e-paper to coffee joulies that keep your drink at the perfect temperature. Here are the 12 most funded design projects.

Jodie Foster may have seen proof of alien lands in the 1997 Robert Zemeckis film "Contact," but the real life astronomer the filmmakers based their sci-fi odyssey on didn't find so much as a tentacle.

A first-of-its-kind commercial supply ship rocketed toward the International Space Station following a successful liftoff early Tuesday, opening a new era of dollar-driven spaceflight.

Many scientists say it's just a matter of time before we find evidence it exists, and now, anyone can get in on the hunt -- as long as they have a computer.

The private rocket company SpaceX is officially "go" to make a second try at launching its unmanned Dragon capsule early Tuesday, May 22, from Florida's Space Coast.

The Supreme Court refused Monday to hear an appeal from a Boston University student who was slapped with a $675,000 penalty for illegally downloading 31 songs and sharing them on the internet.

The European Union has given Google "a matter of weeks" to propose remedies to antitrust concerns arising from its alleged dominant position in the online search market.

A Maryland student was awarded the top prize at the Intel International Science and Engineering Fair on Friday for developing a urine and blood test that detects pancreatic cancer with 90 percent accuracy.

Microsoft recently announced plans to strip the Windows interface to its basics -- flattening surfaces, removing reflections, and scaling back distractions. Here's a brief look at the Windows interface over its 27-year history -- and how it will look tomorrow.

Microsoft's So.cl social network opened to the public at large this weekend. The experimental research project combines social networking and search, the company said -- and the company swears it's not meant to compete with Google+ or Facebook.

Should You Borrow From Your 401(k) Account?

Personal Finance Personal Finance