“Is that a good idea?”
Actually, there are some good reasons for not dipping into your 401(k). When you take out a 401(k) loan, you are removing resources intended for your retirement. And even though you’ll repay the loan, you’ll lose the time when your money could have potentially grown.
Furthermore, if you leave your job, whether voluntarily or involuntarily, you’ll generally be required to repay the loan in full within 60 days. If you don’t, the outstanding balance will be taxable — and if you’re under 59-1/2, you’ll also have to pay a 10 percent penalty tax.
To avoid the need for a 401(k) loan, build an emergency fund containing six to 12 months’ worth of living expenses.
It can be tempting to borrow from your 401(k) — but try to resist this temptation.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor
You can contact Joey at 1940 N. Jackson St., Suite 140, here in Tullahoma. 931-454-2435 or visit www.edwardjones.com.