Even though the economy has begun to demonstrate occasional signs of life, many Americans are still feeling the sting of those darkest days. Millions of homeowners are struggling to pay mortgages they can't afford and those that have walked away from underwater loans now have battle-scarred credit reports. So in order to stay afloat, more consumers are taking loans from their own retirement savings.
According to a report in the Wall Street Journal, the companies that run 401(k) programs are seeing double-digit increases in the amount of loans being taken out against folks' own retirement funds. Vanguard Group says loans are up 14%, T. Rowe Price reports a jump of 11%. And overall, nearly one out of three people with 401(k) plans have outstanding loans.
Why are people so eager to crack open their 401(k)s? They're quick — you can usually get the money in about a week — and cheap to process. They also require no credit check.
But while these loans are a temptation, especially when you're strapped for cash, you are taking a big risk. If you suddenly lose your job, you've only got 60 days to pay that loan back in full. If you don't, it's counted as an early withdrawal, which means you're also saddled with income taxes and penalties.
1 comment:
You had better spend it before the government steals it.
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