It might look like a good option to you – take some money out of your 401k to pay off debt or to take that vacation you’ve been dreaming of. However, there are many factors to consider when you’re thinking about using your 401k as a piggy bank.
The beauty of saving money in a 401k is that you have a tax-advantaged account (meaning, you are likely to not pay any tax on your contributions if you keep the money in your account until 591/2) and over time, your money will be compounding. If your employer is matching any of your contributions, it becomes easier to build up your 401k balance.
If you’re thinking about taking a loan from your 410k, there are some factors that you need to consider first like the interest rate you will be paying, how long you plan to stay at your job and whether they payments will fit nicely in your current budget.
On This Podcast Episode:
- Listen to the reasons why your 401k shouldn’t be used as a piggy bank
- Learn about the information you need to know before you take a loan
- How to create a plan to pay off your 401k loan
- Why you might want to look elsewhere for cash
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Shannah Compton Game is a Money Wellness expert, host of the to-rated Millennial Money podcast, and CERTIFIED FINANCIAL PLANNER with an MBA. Millennial Money has over 15 million downloads in 164 countries. Shannah’s years of experience as a skilled Certified Financial Planner have set her on a mission to revolutionize how people think, act, and feel about their finances…and have some fun doing so.