In today’s troubling economy, many Americans are finding it difficult to stay afloat financially.  Those who are lucky enough to not lose their jobs are still faced with troubles.  They are left wondering, day after day, if the shoe will drop.  Even those in strong and stable careers are being asked to take pay cuts.  If your family is one of the millions suffering financial hardships, you may need financial help and right away.

When one wants to buy a new home, buy a new car, pay for car repairs, or pay for costly medical bills, most turn to financial lenders.  Automobile loans, personal loans, and mortgage loans have been solving financial problems for years.  Unfortunately, times have changed.  Banks have tightened the belt and a less are lending.  What does this mean?  A mother to four with average credit may be unable to secure a loan to replace her broken down car.  Unfortunately, we are talking about a serious purchase here.  How will that mom get to work, buy groceries, and transport her kids?  Not everyone is in areas where public transportation is available.  That mom may turn to her 401k.

For years, financial experts have advised against dipping into 401k retirement savings.  In fact, it was once considered a financial sin.  Yes, in most cases they are right.  You should not take a loan from your 401k.  By doing so, you tread in dangerous waters.  For starters, most individuals are mistaken about taking money from a 401k plan.  See, you don’t just take it.  Yes, it was your money that was originally invested into the plan, but it isn’t “legally,” your money now.  Your employer is in control of it.  They made an agreement to give you that money, but not until you are 60 years old.  If you dip into your retirement savings before 60 years of age, you are not taking what is rightful yours.  Instead, you are a taking a loan.  A loan that must be repaid.

So, should you withdraw money from your 401k?  It depends on the situation.  Do you need a new wardrobe?  If so, don’t.  If you cannot afford it, do not buy it.  If you need a new vehicle and have no other options, dip into your 401k plan.  With that said, do not borrow more than you need.  Your employer will develop a repayment plan.  Pay in a timely matter.  In fact, see if these payments can be automatically withdrawn from your paycheck.  Automatic deductions lessen the risk of default.  In the event you change employers and roll the remainder of your 401k plan over, you are still required to payback the amount borrowed.  In fact, the term of your loan may significantly shorten in the event of a job change.

Although there are certain situations in which borrowing from a 401k is called for or acceptable, try all other avenues first.  Start with your local banks.  Just because you think you will not get a loan, it does not mean you will be denied.  Improve your chances of success by speaking with a loan officer; don’t just drop off the application.  Sell yourself.  If that does not work, try friends and family.  See if you can borrow money to stay financially afloat.  Although you are dealing with friends and family, if you do get a loan, repay.  Do not opt for a payday loan.  They are very risky and dangerous.  When compared, the risks of borrowing from your 401k are smaller than with payday loans.

In short, this troubling economy leaves many in a financial bind.  Do what you must to survive, but always use your best judgment and consider speaking with a financial advisor.  The stock market is suffering and so are many private investments.  Do not pullout or withdraw your money before you are able to see an improvement.