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Are 401k Loans a Good Idea?
Are 401k loans a good idea? No, not really, but they may still be your best option in certain situations.
Until you reach retirement age, 59 1/2 years old, there is a large penalty for withdrawing from your retirement account. If you take an early withdrawal you have to pay federal taxes, state taxes, and a ten percent penalty.
One way to avoid this and still take advantage of this money you’ve saved is to take a loan from your 401k, this is not available for everyone but some companies have worked it into their plans. There are a lot of downsides to doing this, however.
First of all, and this is often overlooked, the money you’ve borrowed isn’t being invested anymore. If you leave the money where it is in your account then you can keep earning returns on it, but while you’ve been borrowing it the money isn’t earning you more for your retirement.
You have five years to repay the loan, period. If you haven’t finished repaying it at that time then the remaining balance is treated as though you had cashed out in the first place, and you’ll then be charged taxes and the ten percent penalty on those funds.
Also, if you lose your job the balance becomes due and you’re typically given somewhere between one to two months to finish repaying the loan. If you don’t, then the balance is treated as though you cashed it out originally, and you’ll be charged the penalty and taxes on whatever you can’t repay.
On the upside, however, the internet on a 401k loan is very low compared to any of your other borrowing options, and the interest you pay goes straight into your retirement plan, so you’re paying the interest to your future self instead of a company. This is a big plus, and a large part of why so many people decide to take the risk.
If you feel you have no other option except to cash out your retirement account than borrowing instead and trying to make payments is certainly a better option for you, but if you have another option for getting funds I’d definitely recommend considering that first.
Free Grants to Help Support Your Family
The fact is that you’ve been seeing free grants in action your whole life. Both rich and poor have prospered from them, while the rest of us have stood by watching on the sidelines. Most recently you have seen Wall Street business people and the big car manufacturers benefit from free government handouts.[amazon_link asins=’1503941353′ template=’ProductCarousel’ store=’simplemicrofi-20′ marketplace=’US’ link_id=’b735dd05-b214-11e7-9ae0-35111b238c56′]
So the time when a person should feel ashamed to live off of free government handouts is gone. It’s flown away just like the corporate jets that auto executives flew into Washington in to pick up their free government bailouts riding in.
So feel proud that you’ve been a contributing tax payer and step up to the window to finally get yourself and your family the financing that is needed. Free money for instance to finally get your home fixed up. In fact these are very popular grants now.
Or if you don’t own a home to fix up, then why not use grant money to put down on a home. Are you you aware how many unsold homes there are right now on the market? The country is full of them and they are creating problem for the housing market.
This why the government is making money available for people just like yourself to finally own and occupy these homes before they begin to fall apart. After all, someone has to take care of a home or piece by piece it will begin to disintegrate over time.
Free grants to start a small business are another way that the government is attempting to kick start the economy. Not only can you get the land and the building to locate your business on and in for free. But the government will right now give you all of the money that you need to hire employees and get your business up and going.