When Americans face financial stress they turn to their retirement accounts for liquid assets. Pensions, 401K plans and 403B plans are where Americans are turning to for quick infusions of cash.
In this past year borrowing from retirement accounts hit new highs. It is estimated that more than 15% of all individuals who have money in retirement accounts have borrowed from these accounts. Are Americans borrowing to the point that they won’t have sufficient funds when they retire? According to a recent Wall Street Journal article, more than a quarter of all retirement plans have outstanding loans against them.
The Effect of Borrowing From Retirement Accounts
Retirement accounts are designed to maximize compounded returns on your investments. Financial advisers believes most people do not have the discipline to pay back the loans against their retirement accounts and are therefore discounting the funds available when they retire. If you lose your job or change your employment, you will be unable to pay back the outstanding loan on your retirement account. If you borrow money against your retirement account and pay a portion of it back and thereafter are fired or moved to a new job, the unpaid portion will be considered a taxable distribution and taxed at income tax rates. You can also be stuck paying a 10% penalty if you default on paying back the loan against your retirement account.
New York Estate Planning Lawyer
Everyone will eventually die. The issue we face is we don’t know when this will take place. From my point of view, the later the better! When you pass on you want to simplify the issues your loved ones will face on your estate. The Law Offices of Schlissel DeCorpo can help you achieve this goal. We draft wills. We probate wills. We litigate contested will issues. We can advise you regarding issues concerning estate taxes.
We draft revocable living trusts and irrevocable trusts. We also draft special needs trusts for special needs children. We can advise you concerning medicaid planning techniques and other medicaid issues. We litigate nursing home abuse cases.