I have money in a 401(k). I am starting photography as a hobby and may make money at it, but I need nice equipment which is expensive. Is it better to take some money out of my 401(k)or borrow from a bank? I am 40 years old.
If you take the money out of your retirement account you will not have a debt payment to make, but the penalty for this may be more severe than the interest you would pay. If you withdraw money from this account before you reach age 59-1/2, you must pay income taxes plus a 10% penalty. This reduces the money you will have in later years plus the earnings potential of that money. You can talk to your banker and find out what the loan would cost you. Weigh that interest expense against the tax and penalty implications. Those are real dollars. Add to this the investment potential which may be estimated based on the historical performance of your account.
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If you take the money out of your retirement 