Ask Terry Questions Borrowing from 401K

Borrowing from 401K

By Terry Savage on August 14, 2018 | Credit/Debt

Hello Terry: I’m 53 years old and would like to borrow $30K from my 401K to pay off a couple high interest credit cards. I can borrow that amount from my 401K and pay it off in 3 years @ 6% interest paying myself back. I realize I’m losing the investment from that money but I’m thinking I’ll be better off doing this than continuing to pay on my high interest credit cards. What are your thoughts. I plan to work until 65. Thank you

Terry Says

You can do this ONLY if you suddenly have learned the discipline not to charge up those “empty” credit cards again. Otherwise, you’re digging a deep hole! There is always a “reason” that you need to put something on a card that has “room” – -ie no current charges.

So this is a test. Promise to write back to me in one year — next Labor Day weekend– if you take this loan and pay down your credit cards. Let me know if you have been repaying the loan — and if you still have a zero balance on your credit cards. Promise to get back to me. THIS WILL BE MY TEST OF HUMAN NATURE!!!

(And do remember, if you leave your job, it must all be repaid immediately or it will be counted as a withdrawal, subject to penalty and taxes!)



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