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?
