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  • 401k loans

    Hopefully this is less for those here who hopefully have emergency funds.

    Many of us are drastically reducing services at work. That means less income for us, but more importantly less income for those who depend on us for our staffs, who are more likely to not have that safety net.

    Our accountants have suggested making sure your office allows for 401k loans. This allows the staff to borrow against their 401k up to 50% of assets up to $50,000.

    This wouldn’t be the best financial move, but when they reach the end of their ropes, it beats the pawn shop or payday lender.

  • #2
    I really prefer it actually be illegal to do such a thing. Yes it's better than a pawn shop or payday lender but let's not move the posts that define what "terrible idea" means. Take out a home equity loan is a better idea, especially since rates have dropped. Or ask your bank to allow you to delay the mortgage payment (I heard BoA is actually going to allow this, so I would expect other big banks to follow). Remember, banks for now are actually in decent shape compared to many other industries.

    Speaking of which, if many other industries are doing so poorly, the chances that anyone loses their job in the next few weeks or months has really shot up. Well, what do you think the rule is on 401k loans if you lose your job? You have to pay it back within 60 days of losing your job. With what money since you lost your job?! yeah this is actually a really terrible idea to be honest and the accountants are giving really, really poor advice to put it nicely

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    • #3
      As JBME mentioned, they're terrible. It's ultimately your decision but you may be giving your staff nooses with which to hang themselves.

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      • #4
        Originally posted by JBME View Post
        I really prefer it actually be illegal to do such a thing. Yes it's better than a pawn shop or payday lender but let's not move the posts that define what "terrible idea" means. Take out a home equity loan is a better idea, especially since rates have dropped. Or ask your bank to allow you to delay the mortgage payment (I heard BoA is actually going to allow this, so I would expect other big banks to follow). Remember, banks for now are actually in decent shape compared to many other industries.

        Speaking of which, if many other industries are doing so poorly, the chances that anyone loses their job in the next few weeks or months has really shot up. Well, what do you think the rule is on 401k loans if you lose your job? You have to pay it back within 60 days of losing your job. With what money since you lost your job?! yeah this is actually a really terrible idea to be honest and the accountants are giving really, really poor advice to put it nicely
        You sound like somebody that has properly prepared for an emergency.

        Sadly most aren't.

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        • #5
          yes I have an emergency fund but what you're not seeming to see is that those who haven't properly prepared still should do something other than take out a 401k loan! like Cord said, you're giving them a noose for themselves. What are they going to do if they take out a loan, use it to pay rent or mortgage or food, and then lose their job in 2 weeks and realize they need to now come up with $50k?!
          I mentioned asking people you owe debt to for some flexibility. I mentioned taking out a loan against your home. If you don't have a home that's not an option, so again, ask for some temporary relief on rent. Most people who don't plan properly also aren't good at taxes and so they probably have a large refund due. File your taxes so you get a refund faster. I'm not just saying taking a 401k loan is a terrible idea....I'm explaining why it's such a terrible idea AND giving alternative ideas. Don't promote this to anyone as a good solution. It's possibly a death wish

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          • #6
            Originally posted by JBME View Post
            I really prefer it actually be illegal to do such a thing. Yes it's better than a pawn shop or payday lender but let's not move the posts that define what "terrible idea" means. Take out a home equity loan is a better idea, especially since rates have dropped. Or ask your bank to allow you to delay the mortgage payment (I heard BoA is actually going to allow this, so I would expect other big banks to follow). Remember, banks for now are actually in decent shape compared to many other industries.

            Speaking of which, if many other industries are doing so poorly, the chances that anyone loses their job in the next few weeks or months has really shot up. Well, what do you think the rule is on 401k loans if you lose your job? You have to pay it back within 60 days of losing your job. With what money since you lost your job?! yeah this is actually a really terrible idea to be honest and the accountants are giving really, really poor advice to put it nicely
            And renters?

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            • #7
              ask to pay less temporarily and/or suspend a month (or more). the landlord can subsequently ask the owner of the mortgage for relief. we're in this together people

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