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Published on: 7/16/2004
Last Visited: 4/26/2005
The costs of your 401(k) loan would neither begin nor end with taxes and IRS-imposed penalties, added Richard Sanchez, a director of national sales for Morgan Stanley's client coverage group.
A 401(k) plan is often your principal means of saving for retirement.When you borrow from the plan, you are removing pretax dollars--relatively cheap money.When you repay the loan, you're using after-tax dollars, or money that is comparatively expensive, Sanchez said.
By removing money from the savings plan, you are also losing the benefits of seeing your money grow in a tax-deferred shelter, sometimes for many years.