Driving Your Retirement Vehicle Home
A 401K should be on the radar of any W-2 employee that wants
to have a comfortable retirement. A 401K
builds and earns interest tax free for retirement years. Taxes are paid on withdrawals in retirement
years when income and taxes are lower.
But a 401K has some other benefits that many people are not aware of.
Having a nest egg is like having a safety net. Most 401K plans allow for a hardship
withdrawal before 59 and a half. With
the security of knowing that there is money set aside in case of emergency,
there is less fear in asking for a raise or taking a chance on a good
opportunity that presents itself.
The number one hidden benefit to having a 401K is that it
can be borrowed against. The 401K is
still earning interest when borrowed against.
Most plans allow the interest paid to go back into the retirement
account – which actually benefits the retirement account. For more information about borrowing against
a 401K, CLICK
HERE.
The average 401K balance is just under $100K. Most 401K plans will allow a loan of up to
$50K or 50% of the vested balance – whichever is less. The loan does not affect credit, nor is it
taxable. From a lending standpoint, the
payments on the loan do not count against a borrower’s debt to income
ratio.
Borrowing against a 401K can often be the difference between
home ownership and renting. A larger
down payment using a 401K loan could also be the difference between paying a
higher rate of interest or higher mortgage insurance rate on a home. Considering
the rate at which housing increases, borrowers can leverage and maximize the
benefits of their retirement savings to live the American Dream of home
ownership. Call the Easterbrook Team
today for more information.
