Confero Fall 2013: Issue 4 | Page 25

You Owe Your Tomorrow they can’t possibly repay.” (source: Roos) This has parents looking for alternative ways to fund their children’s college costs and some are considering borrowing from their 401(k)’s. Loans from 401(k)’s are allowed by law. The statutes governing plan loans usually do not place specific restrictions on the use of the loans, but do state the loans “must be reasonably available to all participants.” (source: 401khelpcenter) However, employers place use restrictions within their Summary Plan Documents on the acceptable reason for borrowing from a participant’s 401(k), of which to paying for education expenses for yourself, a spouse or a child is typically allowed. The only issue remaining is whether it is a good idea to borrow from you 401(k) to pay for college expenses. There are pros and cons, but in the end it will always come down to planning. If a person begins early enough to save for retirement, then presumably he or she will have enough saved to comfortably borrow from the 401(k) to help pay for the college expenses to offset the “cons” of borrowing from the retirement fund, such as the loss of interest on the amount borrowed, possible fees, other opportunity costs. Also, there is a limit of half of the balance or $50,000 maximum you can borrow from the account, so that will only go so far towards the cost of the college expenses. in your 401(k). 401Khelpcenter lists these pros as: 1. There are usually no restrictions, 2. The interest you pay you are paying to yourself, 3. It is convenient, 4. The wait is not long to get the loan, and 5. You are choosing where the money is coming from. If you have planned ahead and saved prudently, then you can, if you choose to do so, borrow from your 401(k) to help pay for college expenses— if the pros outweigh the cons. Instead of risking your future and having a “YOLO” attitude about life and retirement you can successfully “SITUP!” n However, there are many “pros” if you have started early enough and have built up a “comfortable” amount www.conferomag.com | 21