Is Borrowing from Your Retirement Really Such a Bad Idea?
Lauren Klein was featured in this article by Molly Grace on Zing! by Quicken Loans on September 14, 2018. Here's an excerpt:
Some millennials are borrowing from their retirement to finance their homes, according to a recent Bank of the West survey. The question is: Should they be?
“Even borrowing from your account for five years can set you back considerably, and you may never be able to make up the loss,” Lauren Klein, certified financial planner (CFP) and founder of Klein Financial Advisors, said.
Is It Ever a Good Idea?
Before considering borrowing or withdrawing from your retirement savings, look at your larger financial profile. Are your earnings consistent? Is your retirement savings on track? Do you have any other savings? If you’re in a good spot, you might be able to swing it.
But in a nutshell, I’d say: Probably not.
“A home purchase is not an emergency, and I cannot think of any instance where it would be wise to ‘borrow’ from your retirement,” Klein said.
Instead, Klein said it’s best to focus on your long-term financial plan by building an emergency fund and making regular contributions to retirement.
“Once those basics are in place, you can start working toward your goal of purchasing a home – one dollar at a time, and without sacrificing consistent contributions to your retirement account,” she said.
“Saving for retirement is one of the most important long-term obligations you have to yourself. By funding your retirement early and allowing your assets to compound and grow over time, you can move forward with confidence and independence,” Klein said. “Your future self will thank you!”