TRANSCRIPT: I’m asked constantly by people who have been saving money in a 401(k) retirement plan at work how I feel about them borrowing money from it. Everybody will tell me their story about why it makes sense for them to borrow from the 401(k) and almost 100% of the time somebody asks about borrowing from the 401(k) — the answer is no.
Even though the interest rate on that 401(k) loan seems really good, the problem is you are devastating your future. You are taking money out that you will never recover.
In fact, people who tend to borrow from a 401(k) once tend to do it again and again and again. Before you know it your don’t have money to retire.
But the worst thing is if you borrowed from a 401(k) and you leave a job, either you quit or they fire you, the money on that loan is due immediately. You can’t pay, you trigger a huge tax bill plus penalties. So avoid the temptation of borrowing from the 401(k) piggy bank.