The Costs of Borrowing from your 401(k)

On the front end, borrowing from your 401(k) may seem like a sound loan option: it is often at a relatively low interest rate and there is relatively little paperwork involved.  However, such a decision may cost much more than you realize.  After all, you ultimately repay the loan with after-tax dollars which will then be taxed again when withdrawn.  Furthermore, it is often difficult to continue making regular contributions to your 401(k) when you are also making the loan payments.  Finally, by withdrawing money from your 401(k), you are preventing that money from growing and compounding which could significantly impact your retirement nest egg.

Before you decide to take out a loan from your 401(k), make sure you know the pros and cons of such a decision. 

Click here for some considerations.

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