401Ks - the newest ATM

[kcowan]

Quote:

Eighteen percent of workers had loans outstanding from their retirement plans in 2007, up from 11% in 2006

Workers step up raids on 401(k)s - MSN Money
It seems that when they could no longer pull out equity from their houses, they switched to their retirement accounts.

[W2R]

I know a Ph.D. who did that, to add a two story addition to her house. The idea was to pay it back after a year or two. Unfortunately she borrowed it the year before Katrina, which destroyed her house plus brand new addition.

Glad I never borrowed money from my TSP!

[poboy]

[Htown Harry]

Retirement 401(k) Debit Cards Are Costly, Finra Says
Bloomberg.com: Invest

"May 29 (Bloomberg) -- Using a debit card to take cash from your 401(k) retirement plan may generate hefty fees and trigger duplicate taxes, the main U.S. brokerage regulator said...

" Reserve Solutions, a division of the asset-management company The Reserve, sells the debit card to employers as a way of reducing administrative costs, according to the New York-based company's Web site.

"The cards encourage retirement savings by ensuring employees will have easy access to the money when they need it, the company says. The withdrawn money sits in a money-market fund, earning interest, and employees can use the card only for as much money as they need.

"The Reserve declined to comment on Finra's advisory, Mo Shafroth, the company's outside spokesman, said in an e-mail..."

My comment: Let's get a rope.

No, make it two: one for the regulators with only enough brass to put out a press release, one for the sharks at Reserve.

[clifp]

I'll be happy to be on your jury, after you've lynched the folks at Reserve Solution. Disgusting

[tryan]

I wouldn't pre-judge the investors intentions ... I pulled about 20k from my 401k in the early 90's to go to HUD/RTC auctions. The properties WAY out performed the market at that time (giving some back now). And the loans were paid back - to my self - in full with interest (7%). So it was a win - win.

Would not be be fire'd today without that pull from my 401k.

[clifp]

Quote:

Originally Posted by tryan I wouldn't pre-judge the investors intentions ... I pulled about 20k from my 401k in the early 90's to go to HUD/RTC auctions. The properties WAY out performed the market at that time (giving some back now). And the loans were paid back - to my self - in full with interest (7%). So it was a win - win. Would not be be fire'd today without that pull from my 401k.

I don't have a problem per se with borrowing from your 401K. Borrowing from your 401K for Real Estate is one fo the few approved ways that avoid the 10% penalty.

But a debit card encourages foolish borrowing, "I really need the Coach handbag, Calloway driver, trip to Hawaii."
These will be obscenely priced luxuries at age 65, and I curse folks at Reserve Solutions for making this foolish borrowing easy. I'll scream bloody murder when these same spend thrift folks at age 65 start advocating taking money from those of us who didn't borrow from our 401Ks.