Comments on: You Saw It Here First… http://retirementreform-blog.com/you-saw-it-here-first/ Social Security, Retirement Planning | NCPA Fri, 27 Aug 2010 16:18:36 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Jack Towarnicky http://retirementreform-blog.com/you-saw-it-here-first/comment-page-1/#comment-348 Jack Towarnicky Mon, 26 Oct 2009 18:04:41 +0000 http://retirementreform-blog.com/?p=133#comment-348 In an article in the Orlando Sentinel, it states: "... Pamela Villarreal, senior analyst for the National Center for Policy Analysis, a free-market think tank in Dallas, noted that taking a $30,000 loan from a 401(k) and paying it back over five years could leave some people with $200,000 less at retirement. Use the 401(k) loan calculator at retirementreform.ncpa.org." The article's author failed to state how such a loss occurs (difference in interest rates, interest rates for a loan from another source, failure to repay, cessation of contributions while repaying the loan, etc.). So, not sure what you told her. But, you should have encouraged her to reread that study a little closer, and to consider a study from almost a decade ago authored by Professor Munnell. Simply, a loan from a 401(k) need not impact retirement any more than a loan from any other source. And, in today's collapsed credit market, it may have significantly less impact than other sources of money - such as a hardship withdrawal. The issue is whether the loan proceeds are wasted. In an article in the Orlando Sentinel, it states: “… Pamela Villarreal, senior analyst for the National Center for Policy Analysis, a free-market think tank in Dallas, noted that taking a $30,000 loan from a 401(k) and paying it back over five years could leave some people with $200,000 less at retirement. Use the 401(k) loan calculator at retirementreform.ncpa.org.”

The article’s author failed to state how such a loss occurs (difference in interest rates, interest rates for a loan from another source, failure to repay, cessation of contributions while repaying the loan, etc.). So, not sure what you told her. But, you should have encouraged her to reread that study a little closer, and to consider a study from almost a decade ago authored by Professor Munnell.

Simply, a loan from a 401(k) need not impact retirement any more than a loan from any other source. And, in today’s collapsed credit market, it may have significantly less impact than other sources of money – such as a hardship withdrawal.

The issue is whether the loan proceeds are wasted.

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