So, you’ve found out that you can borrow from your 401k and you’re ready to call your company’s 401k manager and request the maximum amount. After all, it’s your money and you need it now. Your human resources page tells you it’s simple to request and you’re paying yourself back with interest so what’s the harm? Slow down. It’s not necessarily a bad thing to borrow from your 401k, depending on the reason you need the money. However, you need to know the 401k loan rules before you take out a loan, just as you would need to know the terms of any loan from any institution. Yes, you are paying yourself back, but in the meantime, the money … [Read more...]
Before You Start Borrowing Against 401k Funds, Stop and Think
The economy has got you down. You are struggling to make ends meet and you worry about money constantly. Then someone reminds you that you can always start borrowing against 401k funds and you wonder if that’s the solution to all of your financial problems. Then you learn that when you pay your loan back, you actually pay yourself interest. What could be better than that? So, you jump on your computer and you go to your 401k manager’s website. You find the loan application, fill it out and prepare to send it off. But something stops you. Suddenly, you aren’t sure whether or not you are doing the right thing. We’re we saving money into … [Read more...]
Is Borrowing from 401k Funds Ever Okay?
“Never, ever, ever resort to borrowing from 401k funds. Ever.” If you have a 401k account through your employer, you have probably heard those words over and over again. Although the option for you to take out a loan on your 401k exists, most financial advisors will tell you that taking one out is a really bad idea. After all, you are trying to use your 401k funds to secure your financial future after you retire. Some people will even tell you that taking out a 401k loan is like stealing from yourself, since you won’t be earning anything on the money you have out. … [Read more...]
Are You Considering a 401k Hardship Withdrawal? Here’s What You Need to Know
You probably had great intentions for your 401k. Maybe you had maxed out your contributions and were looking forward to the day when you could withdraw your funds and spend your retirement in comfort, if not in luxury. Well, life happens, doesn’t it? Now, you’re faced with a financial crisis that you never predicted and you’re considering making a 401k hardship withdrawal. You’ve heard it could be the answer to your immediate problems, but you aren’t sure how it’s going to affect your future plans. You are right, a hardship withdrawal from your 401k could certain help you out with your financial concerns. However, there are some critical … [Read more...]
Can I Borrow Against My 401k Plan? Not If You Can Help It
It can be tempting. You spend years and years building up a stockpile of money that just sits in an account and doesn’t seem to do anything for you in the present. Sure you know your savings is for retirement. But that seems so far away. What about my problems and needs for today? Can I borrow against my 401k and use the money to tide me over for a little while? … [Read more...]
What are the 401k Withdrawal Rules for Getting My Money Back?
Before you go putting too much money into your employers retirement plan to try to hide it from Uncle Sam, it may help you to understand the 401k withdrawal rules and what is involved with getting your money back. For example: What if you have an emergency and you need the money right now? What if you are planning on buying a house? What if you are plan to retire early (before age 59-1/2)? It’s Always Your Money: The first thing you should know is that when it comes to putting your money into your employer's 401k retirement plan is that the money is always yours (not your employers)! This is a very common misconception … [Read more...]
The 72t Rules – How to Make Early Retirement Withdrawals
If you’ve ever wanted to get early access to your retirement savings before age 59-1/2 without having to pay the additional 10% penalty, then you might be delighted to know that there is a little known exception to this process known as the 72t rule. According to the exceptions listed in Section 72(t)(2), the owner of the retirement fund can elect to take distributions using something called a series of substantially equal periodic payments (or SEPP for short). What this means is that you and the IRS would agree to take out pre-calculated amounts each year for the next 5 years or until you turn age 59-1/2 (whichever is later). Each of … [Read more...]
Can I Use My 401k to Buy a House? 4 Possible Options
At first glance when people ask themselves Can I use my 401k to buy a house, it doesn’t seem like such a terrible option. Chances are you’re probably young and sitting on several thousand dollars that you don’t plan to use until decades from now. Why not use the money in the present when you need it today? However you’ve got to remember that because your 401k was intended to be used for retirement, it won’t be as easy as withdrawing the funds you need. You’ll need to know a few of the rules and how to avoid paying unnecessary taxes and penalties. Here are a few of the options you’ll have to choose from. Using a 401k Loan … [Read more...]
What Happens When You Reach the IRA Withdrawal Age?
You have been putting money away diligently in an IRA, just waiting for the time when you can start taking distributions without incurring an early-withdrawal penalty. You have now reached the IRA withdrawal age and you are ready to leave the workforce and enjoy your retirement. However, you want to make sure you understand the rules so you don’t end up making a financial mistake that could cost you a lot of money. Making sure you follow the IRS rules for withdrawal is important, since you don’t want the government to get any more of your money than necessary. When you make an early withdrawal, you are essentially giving the government as … [Read more...]
How to Borrow from 401k Funds in Case of a Financial Emergency
Sometimes, you don’t have any other choice. You are staring at a pile of bills on your counter, your house was flooded by recent rains and you don’t have flood insurance, your wife just fell and broke her leg and you have depleted all of your emergency savings that you were diligently socking away for just such an occasion. Suddenly, your eye falls on your 401k statement and suddenly you know you have to borrow from 401k funds that you haven’t even thought about since you started working for your current company. While most financial experts will advise against taking out a 401k loan, you might not have any options left. If you are facing … [Read more...]