Retirement & Financial Planning Report

If you have a pressing need for cash before you reach 59-1/2 years of age, there are ways to tap your retirement plan without paying a penalty tax. In fact, you may be able to get your hands on your money without paying any tax at all – by borrowing from your plan.


Advantages: Many plans allow participants to borrow from their accounts, tax-free, with little paperwork. You have to repay those loans but your payments go back to your own account. You wind up paying interest to yourself rather than to a bank or finance company.

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Disadvantages: Long-term, you’ll probably get higher returns investing 401(k) money in stocks than in any types of loans. If you leave your employer you’ll have to repay the loan right away. Otherwise the loan will be re-cast as a taxable withdrawal and the 10% penalty may apply if you’re under 59-1/2.