Four reasons this is a bad idea to use your 401 (k)

Household debt rose, driven by the growth in student loans. A Schwab survey found that borrowers have to borrow 401 (k) account for 4 of their nest egg tapping of participants in the survey, but also with a.

Some lenders almost essential: the borrower’s 9% tap pension funds “to buy something special.” ; 4% vacation do so.

Borrow your 401 (k) it is rarely a good idea. There are four reasons:

1. You may rationalize, you pay interest to yourself, and therefore the loan will not cost you anything. However, if the loan you pay 4.25% interest in your 401 (k) investment income of 10% (long-term average of the big company’s stock), and (current average), and you shave your nearly six R percent return, plus all these benefits of compound growth.

2. borrowers often stop contributions, while the loan is outstanding , the long-term fight against their own savings compound interest.

3. your after-tax money , it means, unless you, you will be paying interest on the Roth 401 (k) loan to repay the loan taxed again when you withdraw in retirement.

4. And If you leave your job for any reason, you’ll have to pay the loan back , usually in the remaining 60 days. If you can not, you will owe taxes on the balance, if you are younger than 55,10% penalty, and .