Should I Borrow Against My Retirement Plan?

Employer-sponsored savings plans like the Thrift Savings Plan or 401(k)s often let you borrow against the account balance without penalty before retirement. Should you?

• The real cost of the loan is in interest and compounding. If you're forced to retire later, with less of a nest egg than you'd planned, that "free" loan will turn out to be costly.
• If you leave your job, you will probably either have to pay the entire loan balance right away, or pay taxes and a 10% penalty on what you still owe.
• Even if you stay, most 401(k) loans must be paid back within five years.