From
Your Perspective:
Early bird retirement investing
Borrowing from a
401(k)
Maybe the idea of saving money that you won’t
be able to touch until you’re 59 1/2 makes you nervous.
What if you want to use some of those savings for a down
payment on a home, or what if you need the money for emergency
expenses? You may be able to withdraw money from your IRA early without paying a penalty. And as a last resort, you
might be able to borrow against your 401(k) account, depending
on your employer’s policy. There are drawbacks to
this approach, but you’ll keep the tax benefits your
money has accumulated, and pay back the loan with automatic
deductions from your future paychecks.
Under IRS rules, only certain circumstances qualify you to remove money from your 401(k) without penalty. IRS-approved financial hardships include out-of-pocket medical expenses for you or a dependent, a down payment on a primary home, or college tuition for you or a dependent. Your employer isn’t required to allow hardship withdrawals, so you’ll have to consult with your plan administrator to find out what your options are.
