Borrow Against Retirement?

Reader Question: I have an opportunity to take a loan against my 401(k) retirement, and pay myself interest. Is this a good idea?

 Actually, you’ll end up costing yourself interest. Never take a loan against your retirement!

When you pay interest against your retirement, you cost yourself interest. If you leave the company — which you will someday — the loan against the 401(k) is due within 60 days. If you don’t pay it off, they consider it an early withdrawal and you’ll get taxed and penalized big-time.

If you have a certifiable emergency, like owing the IRS or facing a foreclosure, you may have to withdraw some. You’ll still get taxed, but please don’t ever borrow against retirement!

Dave Ramsey

Dave is the author of The New York Times best-selling book Financial Peace. He is also the host of the nationally syndicated The Dave Ramsey Show, and is a regular guest on television. All of his financial counseling is based on biblical truths. You can hear Dave from 9 a.m. to 11 a.m., weekdays online at www.daveramsey.com. Send your questions toaskdave@daveramsey.com. He resides with his wife Sharon and their three children, Denise, Rachel, and Daniel, in Nashville, Tennessee.

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