F3YRecipes for Life

Recipes For Life

4 Reasons Why Borrowing from Your 401(K) is a Bad Idea

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Borrowing money from a 401(K) is unfortunately a pretty common practice. Though majority of people with 401(K) plans do not touch their retirement savings and take out a loan against it, there are enough people who do so, committing a mistake with serious financial repercussions.

Photo Credit: 401(k) 2013

While borrowing from your 401(K) may seem like a good idea at first glance, especially because of the convenience it brings with no credit checks required and a lower interest rate than most commercial loan products in the market, doing so often means a greater financial loss for you. If you’re major reason is to avoid the credit check requirement, then it is not reason enough because there are loan products out there, like title loans, that also do not ask for such requirements. After you’ve read our reasons for staying away from 401(k) loans, then you’ll probably end up doing the same as well.

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What is a 401k?

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In the United States, as in many other developed countries, the government has a system set in place that will equip workers to prepare for their retirement. This is called the 401k retirement plan, or 401k for short. The traditional 401k is set up so that a worker can invest part of his income without having to pay taxes on it immediately. Only when the money is withdrawn are the taxes collectible.

There are other types of 401k plans, such as the Roth 401k plan. In this set up, the money invested in the Roth 401k plan is considered as after tax dollars. This means that income tax is paid within the year that money is contributed to the plan.

How to Prepare for Retirement

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Photo by lumaxart

Retirement is something that we all look forward to, and for those who work hard for practically every day of their lives, retirement serves as some sort of reward. However, unless you were born rich or you receive an inheritance somewhere along the way, it is absolutely necessary for you to make sure that you have enough money to last you for the rest of your non-working life.

We all know that we need to fund our retirement, but how to do this exactly is another story. If you are young, you still have a long way to go and a long time to prepare for retirement. If you are nearing retirement age, it still is not too late to prepare for this period in your life. What can you do to make sure that you will be comfortably off when you retire? Take a look at some of these things that will help you do just that. [Read more…]

Things You Should Know About Your 401(k)

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Photo by Torley

Retirement is something that working people look forward to. Indeed, many of us dream of retiring as early as possible so as to enjoy our lives without working our bums off. In the United States, the majority of workers prepare for their retirement by putting money into 401(k) plans while they are still part of the workforce. However, it cannot be said that the average person investing in a 401(k) plan knows everything about it. Let me ask you, how much do you know about your 401(k) plan?

Perhaps you may say not much. Maybe you’re thinking – pretty much, actually. Whichever the case, I will not assume that you know all that you need to know about your 401(k) plan. Let me go one step further and outline some important facts that you need to know about 401(k) plans. Who knows, you might pick up a useful thing or two? [Read more…]