Borrowing Against 401k's and Retirement Funds on the Increase?

What ever happened to living within our means? Perhaps we should be looking at the way we spend our money because surely, we are seeing more and more negative savings. Everyone seems to want things now and the best new "thing" that comes to market. Well, I have some alarming news that could be a growing trend regarding borrowing against the 401k's. Unless you are from the moon, you are aware that foreclosures have been on a rise due to the sub-prime issue. This could be forcing people to tap into their 401k funds or other retirement funds. Despite the Fed lowering rates, this isn't helping those that are in a need of a quick fix to get some cash in order to make ends meet.

It is being noted from some retirement planners that there has been an increase in borrowing against retirement funds. Not all retirement funds have seen an increase, however, T Rowe Price, Hewitt Associates, and Hartford Financial Group have been noting a month to month pattern of borrowing. Twenty per cent of Fidelity customers have a loan against their 401k's.

When financial difficulties happen, it is so tempting to tap into those retirement funds believing you can just pay it back. Even though it is easy to borrow from your 401k because there are no credit checks and the interest is only one or two points above the prime rate, borrowing from your 401k should be the very last resort.

Not all 401k's or retirement funds allow you to borrow money. However, you must be qualified as a hardship case. The IRS allows you to borrow up to 50% of the amount vested up to $50,000. Before you consider it, consider these two adverse impacts.

Be a Realist! Time Needs To Be On Your Side!

You are slowing down the growth of your retirement funds. If you believe you are struggling now, you won't be able to catch up between what you borrowed, and what you could have made in those retirement funds.

Your Situation Could Spiral Downhill Quicker!