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Taking a loan from your 401(k).

February 23, 2023

Taking a loan from your 401(k) can be a convenient option if you need access to funds for a short-term financial need.  However, it is important to understand the terms and implications of a 401(k) loan before making the decision.

A key advantage of taking a loan from your 401(k) is that the funds can be accessed relatively quickly, without the need for a credit check or a loan application.  Additionally, the interest on the loan is paid back to your own 401(k) account, rather than to a lender.

However, there are also disadvantages to consider.  Taking a loan from your 401(k) reduces the amount of money available in your account to grow over time, which can impact your long-term financial goals.  Additionally, if you leave your job for any reason, such as a layoff or resignation, the loan must be paid back in full within a short period of time, typically 60 days.  If the loan is not repaid, it may be subject to income taxes and a potential penalty.

Before taking a loan from your 401(k), it is important to consider all the potential consequences.  If you are considering a 401(k) loan, it may be beneficial to consult with a Financial Advisor to understand the best options for your unique situation.

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