Generally speaking though, borrowing from your future is a bad deal even when youre paying interest to yourself.
The loans are tax-free and usually repaid through automatic payroll deductions.
The interest you pay goes back into your retirement fund, so the appeal is obvious.
Of course youd rather pay interest to yourself instead of a bank.
No Interest Til Almost 2027?
But what if you cant afford to repay it?
So suppose your outstanding loan balance was $10,000 and its taxed in the 22% bracket.
With taxes and the penalty, that $10,000 loan would cost you $13,200.
The risks are real.
The Tax Cuts and Jobs Act of 2017 extended the time frame.)
If that were the case, Id be inclined to at least consider a 401(k) loan.
But it doesnt sound like thats the case here.
Its frustrating to watch your retirement balance rise and fall in a volatile market.
But remember that these ebbs and flows are usually relatively minor.
Saving for retirement is a long-haul game, and short-term fluctuations arent a big deal in the larger picture.
The purpose of your 401(k) is to fund your retirement.
Until then, the best advice is: Do.
Robin Hartill is a senior editor at The Penny Hoarder and the voice behind Dear Penny.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
