How to borrow from your 401k — with 3 alternatives

A 401k is one of the most powerful investment vehicles for retirement — and it’s IWT’s favorite thing ever for several reasons:

  1. Pre-tax investments. You don’t get taxed on the money you contribute until you withdraw it at retirement age. This means you have more money to compound and grow.
  2. Free money with employer match. Most companies will match your 401k earnings up to a certain percentage. It’s basically free money!
  3. Automatic investing. The investments you make are taken from your paycheck automatically each month — which is a HUGE psychological benefit.

With all these awesome benefits though comes a cost: You can’t withdraw any of it until you hit the age of 59 ½.

If you do, you’ll be subject to taxes on your withdrawal as well as a 10% penalty from the federal government.

This, my friends, is the monkey’s paw.

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