Can I Borrow Against My Retirement Plan?

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    Bob VineyardPRO
    Founder, Georgia Medicare Plans, Atlanta,GA
    Some retirement plans have the ability to make hardship loans, some don't. Be aware that when you borrow from your plan you are limiting the amount of money you will have when you retire. Even if you pay the money back (which you are required to do) the lost earnings on the borrowed funds have a compounding effect on your benefit.
    Answered on June 3, 2013
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    Larry GilmorePRO
    Agent Owner, Gilmore Insurance Services, Marysville, Washington State
    Can I borrow against my retirement plan?  With some plans, yes you can. But with this option the question becomes "should you"?  Loan provisions would be most common with a 401(K) plan. While usually hardship related, the reasons have been reduced from hardship only status for some time. Trucks, cars, vacations were the norm for a while with retirement plans loans.  The problem with pension loans is they take funds out of the investment pool. Sure you're paying yourslef back, but at 5%. What happens when those funds, left alone would have made 10%? Also if you leave employment for any reason, the loan balance is due immediately or it becomes a pre-mature distribution.  So taxable income and a 10% penalty.  Borrowing from your pension is a last resort only choice. Never a first choice.
    Answered on June 4, 2013
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