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New sign of tough economy: More 401(k) loans
CBS ^ | 06/09/11

Posted on 06/09/2011 9:11:06 PM PDT by TigerLikesRooster

June 9, 2011 10:49 AM

New sign of tough economy: More 401(k) loans

A significant increase in the number of people taking loans out on their 401(k) retirement plans is seen by analysts as fresh evidence of hard economic times.

One-in-seven people took out such loans last year -- up by double digits from 2009, according to the consulting group AON Hewitt.

Sheri Chaney Jones, of Columbus, Ohio, started a consulting business in October and borrowed from her 401(k) to help pay her bills.

"It was extremely easy,' she told CBS News, adding that her financial planner told her "she was seeing more and more people" do it, "because the banks were not giving loans out traditionally to small businesses anymore."

"It's not right for everyone," Jones noted, " but it is your money, you can borrow from it tax-free, you do pay yourself back at interest, but a very low interest, much lower than maybe a traditional bank."

"What I feel optimistic about," Jones says, "is that I will be able to grow this business to not only pay myself back at the current interest, but continue to contribute more toward the 401K than I would have if I would have stayed where I was."

(Excerpt) Read more at cbsnews.com ...


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: 401k; loans

1 posted on 06/09/2011 9:11:08 PM PDT by TigerLikesRooster
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To: TigerLikesRooster; PAR35; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; happygrl; ...

P!


2 posted on 06/09/2011 9:12:00 PM PDT by TigerLikesRooster (The way to crush the bourgeois is to grind them between the millstones of taxation and inflation)
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To: TigerLikesRooster

I know of one person who almost completely drained his 401k. I thank God I’m not even close to having to do something like this.


3 posted on 06/09/2011 9:14:54 PM PDT by CommieCutter (Promote Liberal Extinction: Support gay marriage and abortion!)
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To: CommieCutter

First they drain all sources of cash to cope with the immediate needs, and then ....


4 posted on 06/09/2011 9:17:53 PM PDT by TigerLikesRooster (The way to crush the bourgeois is to grind them between the millstones of taxation and inflation)
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To: TigerLikesRooster

401-Ks are liquidated with penalties, they ain’t “loaned out” (notwithstanding the grace period).

If you have to use it, it’s not the end of the World, it’s just the end of your savings accompanied by a donation to Uncle Sam.


5 posted on 06/09/2011 9:18:25 PM PDT by Gene Eric (*** Jesus ***)
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To: TigerLikesRooster
What happens when all this retirement fund drain comes to a head, i.e.; all these people retire without any money. Looks like Uncle Sam will be having to take care of these people. Thanks a lot Obummer for ruining peoples lives and the country in 2 short years.


6 posted on 06/09/2011 9:19:33 PM PDT by Lazlo in PA (Now living in a newly minted Red State.)
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To: CommieCutter

>> I thank God I’m not even close to having to do something like this.

No doubt there are things worse than laying down to sleep with financial fears on one’s mind.


7 posted on 06/09/2011 9:22:40 PM PDT by Gene Eric (*** Jesus ***)
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To: Gene Eric

It depends on how the employer has it set up.

But why can’t people borrow against their Social Security instead?


8 posted on 06/09/2011 9:24:33 PM PDT by scrabblehack
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To: TigerLikesRooster

At least they are letting account owners borrow.

In 10 years the Gubmint will be dipping into your account.


9 posted on 06/09/2011 9:28:24 PM PDT by mylife (OPINIONS ~ $ 1.00 HALFBAKED ~ 50c)
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To: Lazlo in PA

What’s really sick about this whole situation is that we have an illegal occupant in the White House who is ignoring the laws of the land, ruling against our will and has no emotional attachemnt to us or our country. Based on that, barak is ruling our country as if it were his personal plaything. FR rules and common decency dicate that I do not say what I really think of him. Suffice it to say that this muslim offpring of a female canine is the worst person to ever occupy this office. He is not our president because a president presides over the country’s business and it’s improvements. He is a dictator wannabe and doing all he can to turn us into another kenya.


10 posted on 06/09/2011 9:30:38 PM PDT by Texas resident (Hunkered Down)
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To: TigerLikesRooster
"It was extremely easy,' she told CBS News, adding that her financial planner told her "she was seeing more and more people" do it, "because the banks were not giving loans out traditionally to small businesses anymore."

Yet corrupt big business and corrupt big government get trillions. It's no wonder the economy isn't recovering.

11 posted on 06/09/2011 9:31:27 PM PDT by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: Gene Eric
401-Ks are liquidated with penalties, they ain’t “loaned out” (notwithstanding the grace period).

Not true. At lease some 401Ks (mine, for example) allow you to borrow from them. The funds you are in invested in are sold, the cash is distributed to you with a regular payment schedule over a specified period of time, with interest (under 5% currently in mine). There is no penalty paid unless you fail to make payments; under those circumstances it becomes a withdrawal and you get hit with penalties and taxes. I just did it to buy a house, I had done it for my last house too.

12 posted on 06/09/2011 9:37:06 PM PDT by pepsi_junkie (Who is John Galt?)
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To: Gene Eric

Yes, besided the grace period, you can borrow from a 401k without it being a distribution. It’s an extremely low interest loan. If you make the payments and restore the amount borrowed from your account on schedule,, it is not charged as a distribution.


13 posted on 06/09/2011 9:39:01 PM PDT by DesertRhino (I was standing with a rifle, waiting for soviet paratroopers, but communists just ran for office)
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To: TigerLikesRooster

If you have a brain, CASH THAT SHIT OUT!


14 posted on 06/09/2011 9:46:06 PM PDT by SwankyC (*sniff* I lost my bigot today. Syncro - where are you?)
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To: scrabblehack
why can’t people borrow against their Social Security instead?

Good question. The answer may be because there is real money in 401(k)'s but not in social security.

15 posted on 06/09/2011 9:48:14 PM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: pepsi_junkie; scrabblehack

Good to know those options exist. There are also medical offsets. The bottom line, however, it’s conditional and not like an ordinary loan. Nobody wants the disbursement/penalty surprise during tax season.


16 posted on 06/09/2011 9:49:14 PM PDT by Gene Eric (*** Jesus ***)
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To: TigerLikesRooster

I wouldn’t be surprised if some of them did a pre-emptive withdrawal, before the govt converts them into treasury bonds.


17 posted on 06/09/2011 9:52:46 PM PDT by Trailerpark Badass (I'm sick of damn idiots)
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To: scrabblehack

Cause there is no real asset to take in case of default?


18 posted on 06/09/2011 11:38:26 PM PDT by Semperfiwife (Thank you veterans for keeping us free. Now we have to free ourselves from Obama tyranny)
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To: Lazlo in PA
Well, his grammar sure sucks.

"Dumber than me (am)"

Me am?

19 posted on 06/09/2011 11:50:34 PM PDT by Cobra64 (Common sense isn't common anymore.)
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To: TigerLikesRooster

I did it a few times and it worked pretty well. But there are pitfalls. One is that your 401(k) is losing its earning power while you have the outstanding loan and, secondly, the loan may become a problem if you lose your job and have to pay it back.


20 posted on 06/09/2011 11:58:33 PM PDT by OrangeHoof (Washington, we Texans want a divorce!)
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To: TigerLikesRooster

I’m getting convinced, it’s all about incrementally seizing your stuff...Be it property, 401, stocks manipulation, whatever. Hocking it to survive. I am confident, most those using their 401 as bank, won’t be able to return the money.


21 posted on 06/10/2011 12:18:43 AM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: TigerLikesRooster

Is anybody drawing their money by age 59 & 1/2 (a requirement), paying the 20% Fed Tax, and getting the hell out of stocks and the US plunging dollar to buy something tangible, something that will hold at least some value when the dollar becomes relatively worthless in 2013?


22 posted on 06/10/2011 12:34:17 AM PDT by jobim
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To: CommieCutter

I thought it was hard to get money out; I was told I had to be behind on my mortgage and all. When they fought me enough about it, I just stopped my contributions. While putting money away for the future is obviously a good idea, I no longer think this is the way to go (understand I have other income tax deductions, so don’t really need that aspect of it). The unreported inflation is shrinking the value of these funds even as the statements may report increases in total value, and I saw no point to continuing contributions while putting gas on a credit card.


23 posted on 06/10/2011 3:13:26 AM PDT by kearnyirish2
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To: kearnyirish2

Mine has some kind of hardship withdraw and or loan option.

You’re right though, they don’t make a whole lot of money due to inflation, even if they were to gain 6% by Magic.


24 posted on 06/10/2011 4:13:52 AM PDT by CommieCutter (Promote Liberal Extinction: Support gay marriage and abortion!)
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To: kearnyirish2

..plus I just keep transferring— here and there— amounts to the cash equivalent funds, preparing for the big drop that I think is going to come.


25 posted on 06/10/2011 4:16:14 AM PDT by CommieCutter (Promote Liberal Extinction: Support gay marriage and abortion!)
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To: CommieCutter

I was surprised by how much treasury funds lost; I thought they’d perform better (not make much, but certainly not lose anything).


26 posted on 06/10/2011 5:00:14 PM PDT by kearnyirish2
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