I borrowed from my 401(k) and paid the price | members only

Easy money. A path out of crushing mid-career debt (or at least some of it). And hey, it was my money. Why not borrow from the future? I could always pay the future back. In the 1990s, ages

before my retirement in 2023, I borrowed more than $5,000 from my 401(k) account. (My brain is keeping me safe from remembering the exact amount, or whether I doubled it with a zero-interest

company loan too.) Oh, it was easy to rationalize at the time, and still is. Raising four kids, then all under 12 and requiring the necessities and niceties of growing up in the suburbs of

central New York. Crippling credit card debt, for which I had no one to blame but the adults in the house, nipping at my heels on a daily basis and impervious to several side hustles. Even a

home equity line of credit wasn’t enough of a lifeline. Enter the retirement account. The IRS allows you to borrow up to 50 percent of your vested 401(k) balance or $50,000, whichever is

less. You must repay the loan in full, with interest, over five years; if you don’t, whatever you still owe can be treated as a withdrawal, subject to incomes taxes and, if you’re below age

59½, a 10 percent IRS penalty. Trouble was knocking on our door, and those retirement funds were just sitting there. It would be years before I needed that money. Right? _WHAT’S YOUR BIGGEST

RETIREMENT MISTAKE?_ _Retirement isn’t just about leaving a job. It's about changing your life — your routine, your budget, your priorities, where you live. It's decision after

decision, and you don't always make the right one. Is there something you wish you’d done differently?_ _AARP Members Edition wants to hear about your retirement regrets. A mistimed

exit from the office? A move to the wrong place? A relationship you gave up? Spending too much, or too little? Share your story at [email protected] and we might feature it in this

series._ MISSING OUT ON A BULL MARKET I knew better. As a business journalist, I often talked to financial experts, and borrowing from your 401(k) was considered bad money management. That

hasn’t changed. “The downside is, while you take the loan, the funds are not able to grow within the 401(k),” says Rachael Camp, a certified financial planner (CFP) and founder of Camp

Wealth in Denver.  “You could miss out on potential gains if the market does well while your funds are out of your 401(k). The true cost of the loan is the growth you’ll miss while the money

is not invested.” And while my funds were out of my 401(k) … the market did well. Very well. While I was repaying my loan over the second half of the ’90s, the S&P 500 was gaining more

than 28 percent a year, on average. At that rate of return, my $5,000 would have grown to around $20,000 if I’d left it alone. I don’t want to think about what that extra $15,000 would be

worth now, but I know it isn’t chump change. Niedt takes a stroll through downtown Staunton. The Shenandoah Valley city's small-town core was one of the things that attracted he and

wife to move there in retirement. Lexey Swall To make matters worse, some 401(k) plans prevent borrowers from making new payroll contributions until their loan is repaid. So if your employer

matches contributions, you miss out on that free money while you’re paying back the loan. Both of these things were true in my case, and that was haunting me too.