The Million Dollar Question: Equity Sharing Agreements vs. 401K Loans

Should You Get a Loan from Your 401k?

Weighing the Pros and Cons of Borrowing from Your Retirement Savings

If you're in need of some quick cash, you may be considering a loan from your 401k. After all, it's your money, so why not? But before you sign on the dotted line, there are some things you should know about taking a loan from your 401k.

The first thing to understand is that when you take a loan from your 401k, you are essentially borrowing from yourself. The money you owe will be deducted from your account, plus interest, until it is paid back. This can be a good thing or a bad thing, depending on how you look at it.

On the plus side, you are essentially paying yourself back with interest. So, if you're able to repay the loan fairly quickly, you may come out ahead. On the other hand, if you're not able to repay the loan quickly, you could end up owing a lot of money to yourself.

Another thing to consider is that if you leave your job for any reason, you will typically have to repay the loan in full within 60 days. If you can't repay the loan, the outstanding balance will be considered a distribution from your 401k and will be subject to taxes and penalties.

So, should you get a loan from your 401k? It depends. If you're confident you can repay the loan quickly, it may be a good option. Just be sure to weigh the pros and cons carefully before making a decision.

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