Answered by LifeTuner Staff

Hi Stuner: Here's the section from Retirement on LifeTuner.org: Since you are supposed to use the money from your retirement savings plans during retirement (after age 59 ½ in most cases), there are penalties if you take out funds before then. The federal penalty is 10% of the taxable amount withdrawn, and your state may have a penalty as well. If you take out a loan against your 401(k) and change jobs before the loan is repaid, it’s often immediately payable. If you fail to come up with the necessary cash for the loan repayment, the government will call the unpaid debt a deemed distribution from the 401(k), then tax it and — assuming you’re younger than retirement age — penalize you 10% for an early withdrawal of the money. For all these reasons, we recommend that you never borrow money from your 401(k).

September 28 2011