You are already dealing with increasing debt. Suddenly, you find yourself with an unplanned expense that you cannot afford. You look longingly at your 401(k) balance. If only you could access some of that money to meet your current needs….
In many cases, you can access that money without penalties by borrowing from your 401(k) — but most experts agree that borrowing against your retirement plan is a bad idea, for a variety of reasons.
Borrowers may not understand the long-term harm that they are doing to their retirement account, or they may understand it but still rationalize a retirement-backed loan as their best option. Greg McBride, Chief Financial Analyst at Bankrate.com, uses the example of borrowers thinking that they are harmlessly paying money back to themselves but forgetting about compounding and the time value of money.
Such borrowers do not realize, says McBr…