NuVision FCU September 2015
Loans Now, Groans Later? You Could Regret Borrowing From Your Plan

While borrowing money from your retirement plan may sound appealing at first glance, what you need to recognize is that it could leave you with less money to live on in retirement.

Certainly, with such a loan, your contributions are your own money, and you'll be repaying yourself as you repay the loan. What could be wrong with that? Actually, a lot. Consider these potential negative consequences of borrowing from your plan:
  • Taxes. If you leave your job, you may need to repay any outstanding loan balance within 30 days or risk paying federal taxes on the amount you owe, in addition to a 10% early withdrawal penalty. Also, the interest you pay on a retirement plan loan is not tax deductible.

  • Lost opportunity. Don't overlook the possible "opportunity cost" of borrowing from your retirement account. The money you borrow might otherwise be earning returns with the potential to provide additional cash for retirement. Your lost opportunity could be particularly dramatic if you take money out of the plan during a time when your investment earnings are on the rise.

  • Fees and deadlines. Your employer may charge a retirement account loan fee. Some companies also have specific deadlines for applying for loans, as well as lengthy waiting periods before you can gain access to the money. And, in most cases, you must repay the loan in full within five years. (Longer loan periods may be available if the money is used to purchase a home.)
What's the Alternative? If you're tempted to borrow money from your retirement plan just to splurge, reconsider. A fancy vacation or new wardrobe will probably be an expensive memory in 10, 20, or 30 years, but your need for retirement income will still be there. Don't shortchange yourself. If you're trying to get out of debt, look at consolidating your various debts into one lower-interest-rate account or consider a tax-deductible home equity loan.

In certain circumstances, however, you may find that it is worth thinking about a retirement plan loan. If that's the case, be sure to discuss all the details and rules with your employer and a trusted financial advisor before making a final decision.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Dwight Lee, Craig Fein, Boris Castillo, and June Cachola are LPL Financial Consultants located at NuVision Federal Credit Union. If you have any questions or would like to make an appointment, please call Dwight Lee at 714.375.8227, Craig Fein at 714.375.8222, Boris Castillo at 323.859.5563 or June Cachola at 714.375.8334.

Click here to schedule an appointment

© 2013 S&P Capital IQ Financial Communications. All rights reserved.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

Representatives are not tax advisors or legal experts. For information regarding specific tax situations, please contact a tax professional. For legal advice, consult an attorney.
Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through Kinecta Financial & Insurance Services, a subsidiary of Kinecta Federal Credit Union. CA Insurance License #0E24631. Insurance and investment products: 1) are not NCUSIF insured; 2) are not obligations of or guaranteed by the credit union or any affiliated entities; 3) involve investment risk, including possible loss of value. Kinecta Financial & Insurance Services and Kinecta Federal Credit Union are not affiliated with LPL Financial. Some insurance products available to California residents only.

Upcoming Seminars

Wednesday, 9/23
Understanding when and how to file for Social Security benefits

Monterey Park Chamber of Commerce
700 El Mercado Ave
Monterey Park, CA 91754

For an invite, please contact:
Boris Castillo
LPL Financial Consultant
CA Insurance License #0C97046

Saturday, 9/26
Practical strategies for volatile markets

Costa Mesa Branch
(Harbor Mesa Center)
3195 Harbor Boulevard, Suite 1
Costa Mesa, CA 92626

For an invite, please contact:
Craig Fein
LPL Financial Consultant
CA Insurance License #0E56240

About Us

Connect With Us


NuVision Federal Credit Union
7812 Edinger Avenue
Huntington Beach, CA 92647

© 2015 Copyright NuVision Federal Credit Union. All Rights Reserved. Privacy Policy