Your Retirement Plan Is Not A Revolving Savings Account

September 26, 2012 12:45 PM
Your Retirement Plan Is Not A Revolving Savings Account
" BOSTON (CBS) РMost 401(k) plans and some 403(b) and 457 plans allow the participant to borrow from their plan. According to the Employee Benefit Research Institute’s latest study on borrowing, about 20% of participants have outstanding loans from their plans.

And according to a Fidelity Investments study hardship withdrawals from 401(k) plans have increased. This is money the employee will never repay to her account.

The maximum you can borrow from your account is 50% or $50,000, whichever amount is smaller. And sometimes there is a minimum such as $1000. There are also fees associated with borrowing for there is paperwork involved.

Over 80% of 401(k) plans allow borrowing, the thinking here is that the employee will be more likely to contribute to the retirement plan if they are allowed to get at the money thru borrowing. It could very well be a selling point but I am not a big fan of borrowing from your retirement plan "

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