Should you consider 401(k) loans or withdrawals?

Submitted by Edward JonesPrint Story | Email Story
At some point, you may have more money in your 401(k) than in any other investment. And even though your 401(k) is intended for your retirement, you may one day think you have to tap into your account early — but should you? And if you do, how should you go about it?
 
If it's possible to avoid taking money from your 401(k) before you retire, you probably should do so. You could spend 25 or more years in retirement, and you'll need to pay for those years, so you may want to look for alternatives to your 401(k). If you've built an emergency fund containing several months' worth of living expenses in cash or cash equivalents, you could use some of this money. If you have a Health Savings Account (HSA), you could use it to pay for qualified medical expenses. Or you could sell some of your taxable investments, rather than going into your tax-deferred 401(k).
 
But if you have determined that you must look at your 401(k) plan to meet a short-term funding need, you'll want to carefully consider how to go about it. You typically have two main choices: loans or withdrawals.
 
For plans that allow loans, employees can generally borrow up to 50 percent of the vested amount of their 401(k)s, up to a maximum of $50,000 within a 12-month period. Administrative fees may apply, and Interest will be charged, but it will be added back to the 401(k) account as part of the loan repayments. Except when they're used for a home purchase, loans must be repaid within five years, with equal payments made at least quarterly, unless payments are allowed to be paused temporarily. If you leave the company or don't repay the loan according to the agreement, the loan balance will likely be treated as a taxable distribution.
 
Now, let's consider withdrawals. For 401(k) plans that allow current employees to make withdrawals, the withdrawal requests are usually considered either hardship or non-hardship. To qualify for a hardship withdrawal, you must demonstrate an immediate and heavy financial need to pay for certain expenses, including a home purchase, college, a medical issue or other specified costs, and your withdrawal is limited to the amount necessary to meet the need. Non-hardship withdrawals can typically be taken for any purpose but usually are not granted until you're 59½ or older.
 
Unlike with a loan, a hardship withdrawal can't be repaid, while a non-hardship withdrawal can usually only be repaid by rolling over the amount to an IRA within 60 days. But the bigger issue may be taxes. If you withdraw funds from your 401(k), any previously untaxed money is generally taxed as ordinary income and a 10% penalty will apply if you're younger than 59½, unless you qualify for an exception. Plus, your 401(k) plan typically must withhold 20 percent of the withdrawal for taxes, so you'd have to take an even larger withdrawal to meet your needs.
 
Before embarking on a 401(k) loan or withdrawal, you may want to consult with a financial professional and your tax advisor. Taking money from your 401(k) is a big move, so make sure you know everything that's involved.
 
This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information go to www.edwardjones.com/rob-adams.
 
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Amphibious Toads Procreate in Perplexing Amplexus

By Tor HanseniBerkshires columnist
 

Toads lay their eggs in the spring along the edges of waterways. Photos by Tor Hansen.
My first impressions of toads came about when my father Len Hansen rented a seaside house high on a sand dune in North Truro, Cape Cod back in 1954. 
 
With Cape Cod Bay stretching out to the west, and Twinefield so abundant in wildflowers to the east, North Truro became a naturalist's dream, where I could search for sea shells at the seashore, or chase beetles and butterflies with my trusty green butterfly net. 
 
Twinefield was a treasure trove for wildlife — a vast glacial rolling sandplain shaped by successive glaciers, its sandy soil rich in silicon, thus able to stimulate growth for a diverse biota. A place where in successive years I would expand my insect collection to fill cigar boxes with every order of insects abounding in beach plum, ox-eye daisy and milkweed. During our brief summer vacation there, we boys would exclaim in our excitement, "Oh here is another hoppy toad," one of many Fowler's toads (Bufo woodhousei fowleri ) that inhabited the moist surroundings, at home in the Ammophyla beach grass, thickets of beach plum, bayberry, and black cherry bushes. 
 
They sparkled in rich colors of green amber on beige and reddish tinted warts. Most anurans have those glistening eyes, gold on black irises so beguiling around the dark pupils. Today I reflect on a favorite analogy, the riveting eye suggests a solar eclipse in pictorial aura.
 
In the distinct toad majority in the Outer Cape, Fowler's toads turned up in the most unusual of places. When we Hansens first moved in to rent Riding Lights, we would wash the sand and salt from our feet in the outdoor shower where toads would be drinking and basking in the moisture near my feet. As dusk fades into darkness, the happy surprise would gather under the night lights where moths were fluttering about the front door and the toads would snatch bugs with outstretched tongue.
 
In later years, mother Eleanor added much needed color and variety to Grace's original garden. Our smallest and perhaps most acrobatic butterflies are the skippers, flitting and somersaulting to alight and drink heartily the nectar abounding at yellow sickle-leaved coreopsis and succulent pink live forever sedums of autumn. These hearty late bloomers signaled oases for many fall migrants including painted ladies, red admirals and of course monarchs on there odyssey to over-winter in Mexico. 
 
Our newly found next-door neighbors, the Bergmarks, added a lot to share our zeal for this undiscovered country, and while still in our teens, Billy Atwood, who today is a nuclear physicist in California, suggested we should include the Baltimore checkerspot in our survey, as he too had a keen interest in insects. Still unfamiliar to me then, in later years I would come across a thriving colony in Twinefield, that yielded a rare phenotype checkerspot (Euphydryas phaeton p. superba) that I wrote about featured in The Cape Naturalist ( Museum of Natural History, Brewster Cape Cod 1991). 
 
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