6 disastrous 401(k) mistakes
3. Dipping into savings
There are a handful of circumstances in which pulling cash from a 401(k) might make sense: a home purchase or a new business, for example. Hardship distributions may come in handy in the event of a financial emergency. But as a general rule, workers shouldn’t touch the money, according to Mr. Castille. Savers may be levied a 10% tax on early distributions before 59½. Further, 401(k) loans generally have to be repaid within 60 days.
If you do take out a loan, pay it back immediately, Mr. Castille suggests. Money that’s not in the plan isn’t working for you in the market.