Should You Borrow From Your 401(k)?

attorney A 401(k) is a great tool for saving for retirement.  Most of us worry about having a enough money for retirement and 401(k) allows for reducing taxable income and it also is an exempt or protected asset from most all creditors.  In counseling individuals with financial problems, I am often asked whether a 401(k) loan is a good idea. It really just depends. A recent article on CNBC suggests that it is never a good idea.

401(k) Loans

“Experts” argue that account balances on these accounts are far below the amount necessary for retirement and many do not advise taking out these loans.   Currently, 401(k) plan participants can borrow with paying taxes or the 10% penalty for early withdrawal on as much as 50% of their account balance up to a maximum of $50,000.00.  The Center for Retirement Research at Boston College reports that 11% of people with 401(k) accounts borrow from them each year and somewhere around 20% have an outstanding loan balance.  Other experts suggest that allowing loans in a 401(k) can potentially increase participation rates and even the amount people are willing to contribute because the loans are available.  The Center for Retirement Research found outright withdrawals and cash-outs to ultimately reduce the value of retirement wealth by about 25%.

You are ultimately in charge of your finances, but it may be helpful to seek the advice of an attorney with the skills and knowledge to guide you through the pros and cons of borrowing from a 401(k) if you are in a financial hardship.  There is not a straight yes or no answer, because it really depends on the situation.  It may be that bankruptcy is a good option and you would be better served to leave your 401(k) alone.  Our offices offer a free, no obligation consultation if you are having financial difficulties.

Share This Page

Bond & Botes Law Offices

At Bond & Botes, we now offer full service bankruptcy consultation and filing over the phone or by video from the comfort and safety of your home or office. Please call 1-877-581-3396 or click here to setup your free phone or video consultation.

The lawyers at the Bond & Botes affiliated offices serve clients at offices in Anniston, Birmingham, Mobile, Montgomery, Opelika, Decatur, Huntsville, Florence, Haleyville and Gadsden, Alabama; Vicksburg, Hattiesburg and Jackson, Mississippi. Read our disclaimer here. You can view our Privacy Policy here.

Alabama Offices

Birmingham

2107 5th Avenue North
Age-Herald Building
Birmingham, Alabama 35203
Phone: (205) 802-2200


Shelby County Location
15 Southlake Lane, Ste 140
Birmingham, AL 35244
Phone: (205) 802-2200


Florence Location
121 S. Court Street
Florence, AL 35630
Phone: (256) 760-1010


Huntsville Location
225 Pratt Avenue NE
Huntsville, AL 35801
Phone: (256) 539-9899


Montgomery Location
311 Catoma Street
Montgomery, AL 36104
Phone: (334) 264-3363


Decatur Location
605 Bank Street
Decatur, AL 35601
Phone: (256) 355-2447


Haleyville Location
914 19th St.
Haleyville, AL 35565
Phone: (205) 486-3580


Gadsden Location
430-B Chestnut Street
Gadsden, AL 35901
Phone: (256) 485-0195


Opelika Location
216 South 8th Street
Opelika 36801
Phone: (334) 887-7666


Anniston Location
1302 Noble St #2C
Anniston, AL 36201
Phone: (256) 344-3559


Cullman Location
200 Second Avenue SW
Cullman, AL 35055
Phone: (256) 739-9866


Mississippi Offices

Jackson Location
5760 I-55 North, Ste 100
Jackson, MS 39211
Phone: (601) 353-5000


Hattiesburg Location
607 Corinne St, Ste B8
Hattiesburg, MS 39401
Phone: (601) 264-7200


Vicksburg Location
1212 Farmer Street
Vicksburg, MS 39180
Phone: (601) 353-5000

© 2024 by Bond & Botes Law Offices. All rights reserved. Disclaimer | Privacy Policy