If you’re ever faced with a financial crunch, should you consider taking money from your 401(k)?
Ideally, you should avoid it if you can.
Your 401(k) is designed for your retirement, which may last decades.
So, consider other options, such as withdrawing money from your emergency fund.
But if you feel you have no choice but to tap into your 401(k), think carefully about your next steps.
For plans that allow loans, you can generally borrow up to 50% of the vested amount of your 401(k), up to a maximum of $50,000 within a 12-month period.
You’ve typically got five years to repay the loan.
However, if you leave your job before the loan is paid, you may face tax issues.
For plans that allow withdrawals, you may have to show a demonstrated need, unless you’re already 59½.
But unlike with loans, some types of 401(k) withdrawals can’t be repaid, which could lead to tax issues.
Consult with your tax and financial professionals before taking action on a 401(k) loan or withdrawal.
It’s a big move, so make sure you know everything that’s involved.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor John Dickerson. Member SIPC.
