More Utahns raid their 401(k) so Senate bill seeks to limit 401(k) borrowing

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More Utahns raid their 401(k)
May 24th, 2011 @ 8:35am
  SALT LAKE CITY — Not only are more Utahns tak­ing money out of their 401(k), but many of us are can­cel­ing our pay­ments into the account. AAA Fair Credit Foun­da­tion Pres­i­dent Pre­ston Cochrane said, “Peo­ple react quickly and maybe not as ratio­nally as they should, in fear of falling behind. They look at that and feel it’s their last option.”
“Don’t react. Be ratio­nal and make sure you’re doing your home­work and look­ing at all your options.” — Preston Cochrane
Cochrane says the money isn’t nec­es­sar­ily going to pay for large pur­chases or to bring down debt. He says peo­ple are using it cover reg­u­lar, every­day expenses like food or bills. He says too many of us are strapped and our credit lines are maxed out. “You’re kind of at the end of your rope,” Cochrane explained. “So, you look to see the pot of money that may be sit­ting in your retire­ment account and that might start to look very tempt­ing in terms of access to cash.” Cochrane says it would be a much bet­ter idea to take money out of our sav­ings accounts instead of our 401(k) to avoid the tax hit that will come from tak­ing money out of the 401(k). Plus, he says it’s also a bet­ter idea to sell assets, but many of us feel we’ve already sold what we can. “Well, it’s hard to give up assets if you own them. So, in many cases, peo­ple are much more will­ing to with­draw money out of a 401k.” How can we tell if it’s time to bor­row from the 401(k)? Cochrane says every case is dif­fer­ent. There are times when peo­ple are in extreme need; they have to cover their mort­gage pay­ment or put food on the table and have no other way to pay for it. The main thing Cochrane warns peo­ple to do is not to panic. “We tell peo­ple, ‘Don’t react. Be ratio­nal and make sure you’re doing your home­work and look­ing at all your options and not just tak­ing your friend’s word for it.”   **************************************************************************************************  
May 18, 2011
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May 27, 2011 · Jennifer · No Comments
Tags: , , , ,  · Posted in: Raiding 401(k) - Senate Bill Seeks to Limit, RETIREMENT

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