Borrowing From Your Retirement Plan

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While most of us would rather not take money from our retirement plans until after we retire, we are sometimes left with no alternative. Luckily, most qualified plans offer employees the ability to borrow from their own retirement assets and repay that amount with interest to their own retirement account.

If you find yourself in a financial bind, you may be considering obtaining a loan to meet your immediate financial needs. The question then is should you borrow from your retirement plan or should you look into other alternatives? The answer is determined by several factors, which we will review as well as the general guidelines for plan loans.
Should You Borrow from Your Retirement Plan?
Before you decide to take a loan from your retirement account, you should consult with a financial planner, who will help you decide if this is the best option or if you would be better off obtaining a loan from a financial institution or other sources. The following are some factors that would be taken into consideration:
The Purpose of the Loan
A financial planner may think it is a good idea to use a qualified-plan loan to pay off high-interest credit-card debts, especially if the credit balances are large and the repayment amounts are significantly higher than the repayment amount for the qualified-plan loan.
The financial planner, however, may not think it makes good financial sense to use the loan to take you and your friends on a Caribbean cruise or buy a car for your child\'s sixteenth birthday.

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