Dear Dave,

I have an opportunity to take a loan against my 401(k) retirement and pay myself interest. Is this a good idea?

Susan

Dear Susan,

Dave RamseyActually, you’ll end up costing yourself interest. Never take a loan against your retirement!

When you pay interest against your retirement, you cost yourself interest. If you leave the company — which you will someday — the loan against the 401(k) is due within 60 days. If you don’t pay it off, they consider it an early withdrawal and you’ll get taxed and penalized big-time.

If you have a certifiable emergency, like owing the IRS or facing a foreclosure, you may have to withdraw some. You’ll still get taxed, but please don’t ever borrow against retirement!

—Dave