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Dave Says…Borrow Against Retirement?

Dear Dave, I have an opportunity to take a loan against my 401(k) retirement and pay myself interest. Is this a good idea? Susan Dear Susan, Actually, you’ll end up costing yourself interest…

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Dave Says…Borrow Against Retirement?
From the archive. This report was published on this domain by the community newspaper that ran here before City Home. We keep it online because the record is worth keeping; prices, dates and contacts in it are historical.

Dear Dave,

I have an opportunity to take a loan against my 401(k) retirement and pay myself interest. Is this a good idea?

Susan

Dear Susan,

Dave RamseyActually, you’ll end up costing yourself interest. Never take a loan against your retirement!

When you pay interest against your retirement, you cost yourself interest. If you leave the company — which you will someday — the loan against the 401(k) is due within 60 days. If you don’t pay it off, they consider it an early withdrawal and you’ll get taxed and penalized big-time.

If you have a certifiable emergency, like owing the IRS or facing a foreclosure, you may have to withdraw some. You’ll still get taxed, but please don’t ever borrow against retirement!

—Dave

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