http://enewschannels.com/2008/04/22/enc2942_034910.php Business, Entertainment and Technology News Fri, 11 May 2012 02:04:11 +0000 hourly 1 http://enewschannels.com/2008/04/22/enc2942_034910.php#comment-102927 Kathy Hull Wed, 23 Apr 2008 20:55:44 +0000 http://enewschannels.com/2008/04/22/enc2942_034910.php#comment-102927 Reality check – the market has been very volatile over the last few months (years). People who borrow against their 401(k) accounts now may very well be selling their investments at a low point, locking in their losses. They’ll be sitting on the sidelines should the market take off. They will be earning interest of course but it will be coming out of their own pockets and on an after-tax basis. Furthermore, if they are terminated from their employer that loan will most likely become a taxable event immediately. If they’re under 59 ½ they’ll have to pay a premature distribution excise tax on that amount as well. Then they’ll have to figure out where to get the money to pay those taxes or they’ll have to take more of their retirement savings to cover them, creating a worse tax situation. It’s an option but only consider it as a last resort! Reality check – the market has been very volatile over the last few months (years). People who borrow against their 401(k) accounts now may very well be selling their investments at a low point, locking in their losses. They’ll be sitting on the sidelines should the market take off. They will be earning interest of course but it will be coming out of their own pockets and on an after-tax basis. Furthermore, if they are terminated from their employer that loan will most likely become a taxable event immediately. If they’re under 59 ½ they’ll have to pay a premature distribution excise tax on that amount as well. Then they’ll have to figure out where to get the money to pay those taxes or they’ll have to take more of their retirement savings to cover them, creating a worse tax situation. It’s an option but only consider it as a last resort!

]]> http://enewschannels.com/2008/04/22/enc2942_034910.php#comment-102888 Kimberly Sheek, QPA, QKA Wed, 23 Apr 2008 17:31:58 +0000 http://enewschannels.com/2008/04/22/enc2942_034910.php#comment-102888 IRS rules require that loan interest be set at a rate comparable to what a commercial lender would charge in similar circumstances. That may or may not be the prime rate as indicated in this article. IRS rules require that loan interest be set at a rate comparable to what a commercial lender would charge in similar circumstances. That may or may not be the prime rate as indicated in this article.

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