What is most fascinating is that the majority of them have nothing to do with finances, which should be an eye-opener for anyone planning for or nearing retirement.
While there are absolutely reasons to take a 401k loan, a huge mistake I’ve seen time and time again is people taking repeated loans against their 401k, essentially treating their retirement account like a credit card.
People don't consider that their daily routine will be disrupted and they may feel untethered without a structured schedule, social interaction with coworkers, and the pride and sense of accomplishment that comes from contributing through work.
Thinking Retirement Planning is Just for Your Finances
It might seem like a reasonable idea to take out a 401(k) loan to pay for college, but parents frequently lose out on the larger gains their money would have in the stock market versus the small percentage of interest they are “paying themselves” to borrow.
Using Retirement Money to Pay for Your Kids' College
This is known as asset location which is the mix between taxable accounts (individual/joint), pre-tax accounts (IRAs, work retirement plans), and Roth accounts (Roth IRAs, Roth 401k).
Not Understanding the Different Types of Retirement Accounts