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Chapter 17. Borrowing from Yourself > If You Do Borrow from Your 401(k) - Pg. 174

Borrowing from Yourself 174 Our Advice Open up a line of credit before you need it; there is usually no cost associated with this until you begin to use it. And if there is an emergency, you can tap into it immediately, sometimes as easily as writing out a check and depositing it into your account. If You Do Borrow from Your 401(k) What if you looked at all of the preceding alternatives and nothing there will work for you? What do you do? You take that fall-back position and you borrow from your 401(k) plan. After all, it is your money, and we know you wouldn't borrow from it unless you had no other choice. The Least You Need To Know · Understand what you're doing ... before you do it. Your loan payments come from after-tax dollars. Your interest payments are not tax-deductible. · Repay your loans. Defaulting on a loan will trigger income taxes and possibly a 10 percent penalty. · Continue your contributions if allowed. Decreasing your contributions can make your pot of gold much less