401k debit cards?

January 15th, 2008 by mgkimsal Leave a reply »

Wow – I was just blown away reading this story @ Yahoo this morning.  Debit cards you can use against your 401k.  Borrowing against your 401k has traditionally been a ‘last resort’, because if you didn’t repay it within 60 days of leaving a company, you had to count it as regular income, pay tax, plus a penalty.  This new scheme described gives you up to 5 years to pay the loan back, regardless of where you work, which is a good thing.  But they’re also charging you for the privilege of borrowing your own money – 2.9% above prime, I believe.

I dunno – in general I think this is a bad idea.  People will get themselves in trouble with this scheme, and *I* – and you – and many other people – will end up bailing them out in the next 20-40 years.  Not something I’m looking forward to.

What do you think?

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