Wednesday, October 17, 2007

Older Americans borrow against 401(k)s...tax hits and all

Despite potential tax and investment problems, more investors have been borrowing from their 401(k) plans or taking hardship withdrawals in recent months, some retirement plan providers say.  Many in the field expect more borrowing in 2008, as consumers struggle with tighter credit and potentially higher mortgage payments.  "I don't think it's a groundswell but it's enough to be noticed," said Rick Meigs, president of 401khelpcenter.com, which provides information on 401(k) plans. Increased borrowing on 401(k)s could be because of the credit crunch and slumping housing prices. To be sure, the indications are preliminary; it's too early to say why it's happening, according to the Hartford Financial Services Group.   Borrowing against your retirement nest egg may seem tempting but it presents a host of problems. It could significantly reduce your savings at retirement and create an expensive tax bill if you can't repay the loan when it's due.

Source and more:  Chicago Tribune, http://www.chicagotribune.com/business/yourmoney/chi-ym-borrowing-1014oct14,0,5181066.story

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