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 ...
P!
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.
First they drain all sources of cash to cope with the immediate needs, and then ....
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.
>> 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.
It depends on how the employer has it set up.
But why can’t people borrow against their Social Security instead?
At least they are letting account owners borrow.
In 10 years the Gubmint will be dipping into your account.
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.
Yet corrupt big business and corrupt big government get trillions. It's no wonder the economy isn't recovering.
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.
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.
If you have a brain, CASH THAT SHIT OUT!
Good question. The answer may be because there is real money in 401(k)'s but not in social security.
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.
I wouldn’t be surprised if some of them did a pre-emptive withdrawal, before the govt converts them into treasury bonds.
Cause there is no real asset to take in case of default?
"Dumber than me (am)"
Me am?
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.
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