Since 401K loans have been getting a lot of ink in the personal finance blogsphere, I wanted to take a moment to throw up a quickie video by David Bach on 401K plans. At 3:30 seconds its a quick watch so you can check it out at on your break at work.
If you aren’t able to access the video, the main points are:
1. Don’t borrow against your 401K unless it is for the purchase of a home.
2. Pay the loan off as soon as possible.
3. If you lose your job, you need to pay the loan back in 90 days. If you don’t pay the loan off, it is considered a withdrawal. Withdrawals are subject to a 10% penalty and may increase your tax bracket
4. All 401k plans have good investing options. If you don’t know what to invest in, go to your HR plan to find out the investment company representative.
5. Most 401K plans have a fee only advisory service built in, so you can probably get some good free advice.
As a quick side note – In general in can’t go wrong with David Bach. However much of what David has to say is conventional wisdom, which will make you comfortable and secure, but probably not fabulously wealthy. If you want to get rich quick, you’ll have to look elsewhere.