401k loan

[NASCAR20FAN]

It's obvious. ...that YOU don't get it.
If you have no other options, there is no harm in it.
You're NOT screwed in the end.
This is what you don't understand. You put your income into it for a rainy day...whether that comes before retirement or not, that's what it is for. Most people don't even have that option. It's a bonus to those of us who do.

I think you taking what I said pretty personally!

P.S.

A 401(k) buy definition is not a rainy day fund!

[BlessedOne]

[QUOTE=NASCAR20FAN;140964]There is not doom and gloom nor fear coming from me! Like I always say on here, all I can do is speak fom my experience. You obviously do what you fell you have to.[/QUOTE]


What you said about speaking from experience is exactly what others are saying. Some of us are speaking from personal experience and it apparently worked for us. WE did what we had to do at the time. So there really is no right or wrong way to approach this issue. You gotta do what works for you.

[Monty2000]

Interesting thread - I'm on my 2nd 401K Loan now. The 1st was somewhat mandatory to my situation. The 2nd one that I just got 2 months ago, is just a buffer. It makes for a much more Stress Free life. Actually having money in a Savings Account, is worth much more to me than the money lost from interest or whatever.

Anyway, anyone ever take out a 401k loan to end their 13 BK early? I'm considering it.

[Flamingo]

As in the OP's situation, taking a loan out of one's 401(k) should be the last resort when your back is totally up against the wall and there is no other way. Most people have money withheld by their employer pretax to put into their 401(k)s so when you take out a loan, you are not taxed on that loan but are only taxed on the amount if it becomes a distribution. That can occur if you get fired, leave your job, etc. While you can change jobs and switch your 401(k)s to your new employer, you cannot switch a loan so all that has to be considered when one takes out a loan in case it has to become a distribution and be subject to taxes and penalties. The OP has to weigh this out and apparently she has. It appears she has permission to do this. I am sure she is aware of the risks involved but if she pays it back prior to leaving her job, it's no big deal. You can take loans for various reasons from your 401(k) plan - the key is to be prudent; also you can only have one loan at one time for one 401(k) plan so it's not like you can keep adding on to a loan. There are restrictions. A loan would have to be paid off first before another loan can be taken.

With this economy, many people now are doing this with their 401(k)s which raises red flags as to the future of social security. Many people are utilizing their 401(k) plans for loans and distributions and this will lessen the funds they will have available at retirement and put a huge additional strain on social security and also on the working generations under us. This was a front page article in our local newspaper last week.

I would not take utilizing one's retirement funds for anything lightly; only as a last resort if nothing else is possible or if it is an emergency.

[krielly]

[QUOTE=Flamingo;142685]With this economy, many people now are doing this with their 401(k)s which raises red flags as to the future of social security. Many people are utilizing their 401(k) plans for loans and distributions and this will lessen the funds they will have available at retirement and put a huge additional strain on social security and also on the working generations under us. This was a front page article in our local newspaper last week.[QUOTE]

I'm confused... How does people borrowing from their 401K plans put a strain on Social Security? The two are not connected in any way..........Not sure I understand what you are getting at.

[Flamingo]

[QUOTE=krielly;142873][QUOTE=Flamingo;142685]With this economy, many people now are doing this with their 401(k)s which raises red flags as to the future of social security. Many people are utilizing their 401(k) plans for loans and distributions and this will lessen the funds they will have available at retirement and put a huge additional strain on social security and also on the working generations under us. This was a front page article in our local newspaper last week.

I'm confused... How does people borrowing from their 401K plans put a strain on Social Security? The two are not connected in any way..........Not sure I understand what you are getting at.

The old pension plans given out by employers in teh past are long gone, replaced by 401(k) plans startingin the 1980's. Employees now had to take charge of their retirement funds and no longer had pensions to bank on for retirement. Pensions supplemented social security income when retirement came; now 401(k)s are around to supplement social security income when retirement comes. With 401(k) plans come the opportunity for taking out loans or taking out funds via a disbursement giving one an easy way to touch retirement funds. When touched via loans and disbursements, the funds become less for retirement, even when a loan is taken out (excellent commentary this morning regarding this on Good Morning America). With people having less and less saved for retirement by consistently taking out funds from their 401(k)s, it will put a huge strain on social security with more people relying on social security to get them through retirement, and we all know you just don't get a lot on social security. Can one actually live fully on social security in today's world? Most people now put off retirement because they cannot afford to retire. There will be more people in the coming years on social security than ever before (boomers) with hardly any savings if they keep tapping their retirement funds.

If anyone has the link to ABC's Good Morning America, the commentary on taking loans and disbursements out of one's 401(k) was excellent. They should have something about it on the webiste - their finance person discussed it fully this morning. Also if you google news for loans and disbursements as to 401(k) plans, you will see what is being said about all this and how it will have a major impact on the future.

The woman on GMA also stated that only in an emergency should one touch 401(k) funds and even if you take out a loan, it was described how that puts a dent into your final savings because that money was not in your 401(k) account earning interest even though you were paying it back over a period of time. All you have to do is run the numbers and it is a big wake up call.

[MajorMike]

Flamingo, we have a 401k AND a pension. My employer matches 6 percent ( 100 percent of 6 percent ) and also fully funds my pension as well. I have 2 seperate accounts under one umbrella. I can't touch the pension until I'm vested. I get about $6K a year in my pension and I put 12 percent into 401 K, and then employer gives me another 6%

[Flamingo]

Flamingo, we have a 401k AND a pension. My employer matches 6 percent ( 100 percent of 6 percent ) and also fully funds my pension as well. I have 2 seperate accounts under one umbrella. I can't touch the pension until I'm vested. I get about $6K a year in my pension and I put 12 percent into 401 K, and then employer gives me another 6%

Not everyone has that MajorMike...while there are still some pensions around, especially for those that may be in high executive positions, most have been eliminated for the average worker. Back in the 80s, the company that I worked for eliminated pensions and at the time they did that, I was vested in their old pension plan. I will get that when I turn 65, no sooner. After that elimination date, 401(k)s were offered to all employees. Most people in the employment market after that time have no pensions...just 401(k)s in which they also have to become vested in order to obtain the employer's contributions. Also in the Good Morning America segment this a.m. a company in New York is coming up with a debit card to access your 401(k). Needless to say, the GMA financial expert was not very happy about that!

[DebtSlave]

Now I am wondering what you all think about a loan against a whole life insurance policy?

[One Half Full]

Also in the Good Morning America segment this a.m. a company in New York is coming up with a debit card to access your 401(k).

Are you kidding? That is Terrible!

[chpxiii]

Not everyone has that MajorMike...

I was a teen in the 80's. I remember hearing how pensions were going away and employers were offering 401k plans. I don't have a pension at all. I think theone person I have met that *does* have a pension, it's because he was union. (That's in California.)

At this point in time, "pension" isn't even a blip on an employee's radar regarding benefits from a potential employer.

Further, what with all the layoffs so quickly, one can't even get *vested* in a pension plan. You're out of there before the company has to make any sort of commitment to you.

[Flamingo]

Also in the Good Morning America segment this a.m. a company in New York is coming up with a debit card to access your 401(k).

Are you kidding? That is Terrible!

No joke - how it works is that you take a loan out on your 401(k) and the debit card allows withdrawals on that loan just like your regular bank debit card. Really a bad move and the financial expert just could not believe that was being done by this company. Can you imagine someone going to McDonalds and paying for it out of their 401(k)?