Borrowing money from your retirement plan
When you have a sudden need for cash, you may consider taking out a loan from your 401(k) or 403(b) plan. But there are certain things to keep in mind:
1. The interest is not tax-deductible so you can not write it off on your tax return as you would mortgage interest.
2. While the money is not in your account, you are missing any potential gains that the investments may have earned.
3. If you leave your job or are terminated, the outstanding balance will be considered a 'deemed distribution' and you will have to pay heavy taxes on it.
While not always a bad decision, loans taken out from a retirement plan can be dangerous...
more info
1. The interest is not tax-deductible so you can not write it off on your tax return as you would mortgage interest.
2. While the money is not in your account, you are missing any potential gains that the investments may have earned.
3. If you leave your job or are terminated, the outstanding balance will be considered a 'deemed distribution' and you will have to pay heavy taxes on it.
While not always a bad decision, loans taken out from a retirement plan can be dangerous...
more info
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