How to Borrow Against Retirement Funds
You have probably been told you should never borrow from your retirement fund, which is basically true, but sometimes there is no other choice. It is your money and you can borrow against it, but you need to be aware of the penalties and fines that you may face when you borrow against any retirement fund.
- Realize that if your retirement
fund is a 401k that is through your employer, there are ways you can
borrow against it without paying penalties or fines. First, if you
are 59 ½ years old you can access the account and at 70 years of
age you have full access with no penalties. - Never withdraw your retirement
funds completely, but take out a loan against it. While you do have
to pay this back with interest, you are not fined as much as you
would be if you withdraw the entire amount. - Request a loan due to prevent a
hardship. When you take a loan against your retirement fund that is
specifically to prevent home hardships, you will have more flexible
options to pay is back. Moreover, in most instances the fines and
penalties are waved when it is due to hardship. - Contact the retirement loan
officer to see how much you can borrow and what fines or penalties
will be involved. Taking out the loan itself is not difficult, but
you have to understand the amount you will be required to pay back
and until you do, you cannot contribute to your retirement or 401k
fund. You should only borrow the absolute necessary money you need
and nothing more.