When we put money into our retirement accounts we do so for a specific purpose: retirement. All the money you have funneled into your 401(k) is supposed to buy you that dream retirement lifestyle you spent your entire life working toward. But unfortunately, more and more people are finding that life can throw them curveballs that, in turn, can throw off their financial plan. Often times, when people find themselves in a financial bind, they find it hard to ignore that shiny apple hanging in front of them in the form of their 401(k).
Far too often people are reaching out to pick that apple and borrow money from their 401(k). The reasons for their need varies from home purchases, to their kid’s college tuition, to a myriad of other financial emergencies. Most people who make this move know that it’s a “forbidden” action, but what many people don’t understand is why. What is the danger in picking that apple and borrowing money from your 401(k)? If more people knew the consequences, it would be hard to believe that many of them would make the same decision.
So what’s the big deal about borrowing from your 401(k)? What are those consequences that I as your financial advisor seem so concerned about? Here are just a few.