Financial Planner: Borrowing From 401K Better Than Maxing Credit Cards

401K Borrow
By WBBM Newsradio 780 AM & 105.9 FM

CHICAGO (WBBM NEWSRADIO) -- Desperate times may call for desperate measures for some people, and that would include taking money out of your retirement account.  

Financial planners advise people to leave retirement accounts alone, but with unemployment at levels not seen since the Great Depression, people may need to access any savings in order to pay the bills.

"That might be a better option than, let's say, maxing out a credit card at a very high interest rate," said Ed Gjertsen, Certified Financial Planner Mack Investment Securities in Chicago. 

Gjertsen told the WBBM Noon Business Hour that the first coronavirus relief bill allows people to borrow against their 401K without penalty for amounts up to $100,000.

"You can take 100 percent of your vested balance up to $100,000. You can repay that loan over time. It's a five year repayment," Gjertsen said. 

He said it can give you some breathing room.

"As you get back on your feet, hopefully in a year or so, you can pay back that loan amount and continue to attribute it to your retirement," Gjertsen said.

He said to consult a financial planner before borrowing against your retirement account.