How to Borrow from Your 401(k) with Empower Retirement

Are you considering borrowing from your 401(k) account? If so, you're not alone. Many people turn to their retirement savings for financial assistance during times of need. In this blog post, we'll explore how to borrow from your 401(k) with Empower Retirement, a leading provider of retirement solutions.

What is a 401(k) loan?

A 401(k) loan allows you to borrow from the balance you've built up in your retirement account. With Empower Retirement, if allowed by the plan, you may borrow up to 50% of your vested balance, for a maximum loan amount of $50,000.

How do 401(k) loans work?

Borrowing from your 401(k) with Empower Retirement is a simple process. Here are the steps:

1. Contact Empower Retirement to inquire about your eligibility for a loan.
2. If eligible, complete the necessary paperwork to request a loan.
3. Wait for approval from Empower Retirement.
4. If approved, the loan amount will be disbursed to you.
5. Repay the loan through payroll deductions over the specified term.
6. Continue to monitor your retirement account to ensure you're on track for your long-term goals.

The opportunity cost of borrowing from your 401(k)

While borrowing from your 401(k) can provide short-term financial relief, it's important to consider the long-term implications. When you borrow from your retirement account, you're essentially taking money out of your future self's pocket. This means potentially missing out on the growth and compounding interest that your retirement savings would have earned.

Pros of taking a 401(k) loan

Despite the opportunity cost, there are some potential advantages to borrowing from your 401(k) with Empower Retirement:

• No credit check or lengthy approval process
• Competitive interest rates
• Funds can be used for any purpose
• Interest payments are made to yourself, not a lender
• Repayment through payroll deductions is convenient

Cons of taking a 401(k) loan

On the flip side, there are also some drawbacks to consider:

• Reduced retirement savings and potential for missed growth
• Loan repayments can limit your cash flow
• Loan repayments are not tax-deductible
• If you leave your job, the loan may become due in full
• If you're unable to repay the loan, it may be considered a distribution and subject to taxes and penalties

When to consider a 401(k) loan

A 401(k) loan may be a viable option in certain situations, such as:

• Emergency expenses
• Debt consolidation
• Home improvements
• Education expenses

Repaying a 401(k) loan

Repaying your 401(k) loan with Empower Retirement is straightforward. The loan amount will be deducted from your paycheck on a regular basis, typically bi-weekly or monthly. It's important to budget accordingly to ensure you can comfortably meet your loan obligations without sacrificing your other financial goals.

Alternatives to 401(k) loans

If borrowing from your 401(k) isn't the right option for you, there are alternative ways to access funds:

• Personal loans
• Home equity loans and lines of credit
• 0% APR balance transfer credit cards
• Emergency funds
• Debt relief options
• Bankruptcy as a last resort

Will your employer know?

One common concern when borrowing from a 401(k) is whether your employer will be aware of the loan. With Empower Retirement, your loan activity is confidential. Your employer will not have access to specific loan details unless required by law.

The bottom line

Borrowing from your 401(k) with Empower Retirement can provide a temporary solution to your financial needs. However, it's important to carefully consider the long-term impact on your retirement savings. Before making a decision, weigh the pros and cons, and explore alternative options. If you're unsure about the best course of action, consult with a financial advisor for personalized guidance.

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