Sunday, February 24, 2008

Avoid 401k loans

There were two articles in the N&O this Sunday about 401k loans. The first was about them becoming increasingly prevalent and the other was a Q&A about 401k loans.

The net of these hopefully will be that while these might be a short term option, they carry tough and long term penalties. Sure, if you have a medical emergency or may lose your house, then these sorts of loans are not bad ideas. But do not make it a habit and use it to reset their lifestyle to be realistic.

The downfalls to 401k loans include that people typically will stop contributing to their 401k while they repay the loan. Plus, the repayment of the loan is with after-dollars. So, this can be a big loss overall.

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