How to Use Your 401K to Consolidate Your Own Debt and Live on One Income

Conventional wisdom tells us never to touch our 401K accounts until retirement - but conventional wisdom, as we know, can be wrong. So when might it make sense to withdraw your hard-earned savings before retirement? Conventional wisdom, again, would probably tell us to take it out only in emergencies. But there are situations when it makes sense to take out a 401 K loan, and when it may be a better choice than your other financial options.�

But first things first: you must have something to borrow from. Are you contributing to your 401K plan? Here conventional wisdom is right: you should be contributing as much as possible. You may be able to contribute as much as 25 percent. Many people�might not be able to set aside that much out of each paycheck and still pay their bills.�But if your employer offers a full company match of say, 4 percent, you should contribute at least that much. For when you contribute that 4 percent,�you are actually saving the equivalent of 8 percent of your check. And because you're contributing to a 401K, your contribution will not be taxed until you retire, reducing your taxable income - and your taxes - until then.�

But let's suppose you know all this and have been contributing to your 401K plan on a regular basis. You now have a balance from which to borrow. When should you borrow from it?�

No amount of money can compensate for the time spent with your child.

Credit: Ruth Baumhover (my wife)

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