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Robbing Peter to pay Paul More people borrowing from their 401 k plans Atlanta, GA

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Robbing Peter to pay Paul: More people borrowing from their 401(k) plans

As residents of Georgia and individuals across the nation continue to struggle with high debt loads and overwhelming monthly bills, a dangerous trend is rearing its ugly head. Employees are not only failing to save as much as they should for retirement, they are actually borrowing from their own retirement savings accounts and further jeopardizing their futures.

Estimates show that a quarter of American workers are currently borrowing money from their own 401(k) plans in order to pay their non-retirement related bills. Defined contribution pension plans – also known as 401(k) plans – are employer-sponsored retirement savings accounts and employees can contribute money to the accounts on a tax-free basis. After as employee retires, the funds are available for use and are taxed at the employee’s post-retirement tax rate, which is typically lower than when he or she was working.

While some may view their retirement savings as easily accessible funds during times of need, borrowing from those types of account can hurt them in the long run.Filing for bankruptcy may be a far better option than taking a loan on 401(k) funds.

Dangers of borrowing from a 401(k)

As with any loan, there are costs associated with borrowing from one’s 401(k). The money borrowed is repaid with interest, as one would expect, but that is not all. Funds borrowed are tax-free but the loan is repaid with money that has already been taxed and, when withdrawn after retirement, those funds are taxed again.

Additionally, the payback period for 401(k) loans is typically 30 to 90 days and, if the loan is not promptly repaid, or the borrower loses his or her job before repayment is complete, the borrower must:

  • Immediately repay the entire amount
  • Pay a 10 percent withdrawal penalty
  • Pay income tax on the borrowed amount at the borrower’s current tax rate

Furthermore, when people are repaying such loans, they typically stop funding their 401(k) plans, putting them even further behind on their retirement savings.

Essentially, borrowing from your 401(k) is like robbing your future self. There are other options available, however.

Financial assistance through bankruptcy

Filing for bankruptcy can be a much better option for most individuals who suffer from overwhelming debt. Bankruptcy helps millions of people attain freedom from creditor harassment, wage garnishment, home foreclosure and financial ruin.

Filing for Chapter 7 bankruptcy may wipe the slate clean of most, if not all, of an individual’s unsecure debts. Chapter 13 bankruptcy allows a person to restructure his or her debt load, consolidating payments into a manageable amount each month.

For those who are already retired, bankruptcy can protect your retirement income by wiping out medical and credit card debts.

If you are considering tapping into your retirement savings to help pay your current bills, consult with an experienced bankruptcy attorney to find out what options may be available to you.

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Our Client Reviews

Gingold & Gingold LLC
5.0 / 5.0

Based on 28 reviews

Jack L.

They did an excellent job with my case. Jamie took the time to really listen and understand things. She delved into the details and was extremely knowledgeable and non judgmental. Very professional and they know what they are doing. Would definitely recommend!

All C.

Mr. Gingold was recommended by an attorney I had worked with previously. I met with Ira Gingold to discuss credit issues. He went over each specific issue thoroughly. He advised me of the potential outcomes. He did all this in one meeting for a very reasonable price. When we finished I was confident in moving forward with a resolution. He definitely wants to help people take the appropriate course of action for their circumstance.

Karen B.

Dear Mr Gingold, There are so many reasons to be thankful for all you have done and will do. Anyone who has ever had unfavorable experiences with an attorney or the legal system will feel the trepidation that I experienced once I realized that my situation seemed hopeless. It was by chance and happily good luck that I decided to put my future and sanity into your hands. I was mortified at having to deal with my debts by claiming bankruptcy. I remember in our first meeting how you assured me that I was not alone and should not feel ashamed. And, anyone in this position obviously does not have money to spare and you were clear about all the costs and allowing me to pay according to my own ability to do so. You advised me in all aspects of the law, but also, you were at each meeting incredibly supportive and complementary of my personal and professional plans. Anyone else in this situation should feel blessed to have access to your expertise and support.

Lyla B.

I thought the process of filing bankruptcy was going to be a difficult one. However, Gingold & Gingold treated me with respect and dignity from the moment I walked through their door. I had the pleasure of working with Jamie. She is very responsive, professional, and knowledgeable. She took the time and listened to my every concern and handled each and every one of them to my satisfaction. My experience with filing bankruptcy under Gingold & Gingold's representation exceeded my expectations in a major way. They gave me such a peace of mind. I am very pleased with my decision of going with Gingold & Gingold to represent me when I filed Chapter 13 bankruptcy.

Julie T.

Wow! I am finally out of debt and can say that I am debt free after completing my chapter 7 bankruptcy case with Gingold and Gingold. Mr dangled was very knowledgeable and direct with regard to my debt situation. there were no surprises and the case went as I was advised. The staff was also very helpful whenever I had a question. I will definitely recommend them in the future to my friends.

Sherard W.

I cannot say enough about this law firm. From the initial consultation to our discharge, the entire office kept me updated with every step of the entire process. I came to the Gingold after a bad experience with another law firm. Ira and Jamie immediately began treating me like family through this experience. In the end, they assisted with eliminating many debts including my 2nd mortgage. I cannot say enough about the experience and knowledge that Ira brought to the table from the office visits to the court time. Thank you very much for helping me through this tough time. Thank you.

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