Catherine Delahaye | Getty<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Taking a loan against your 401(k) savings is generally a bad idea \u2014 but using the money as a short-term “bridge loan” may be an exception, according to Blair duQuesnay<\/a>, a certified financial planner based in New Orleans.<\/p>\n “I’ve always been very anti-401(k) loan,” duQuesnay said. “However, I have found there are some instances in which it makes sense.”<\/p>\n In fact, she recently employed that strategy herself when buying a new home. DuQuesnay, an investment advisor at Ritholtz Wealth Management and member of CNBC’s Advisor Council<\/a>, used a 401(k) loan<\/a> as a short-term pot of cash for a down payment.<\/p>\n<\/div>\n Borrowing against retirement savings served as a bridge loan that duQuesnay plans to pay back after selling her old house. She doesn’t intend to sell until after moving out and making some repairs. \u00a0<\/p>\n This may be a good strategy for those whose budget can absorb the monthly mortgage and 401(k) loan payments, she said.<\/p>\n<\/div>\n Federal law lets workers borrow up to half of their 401(k) balance, capped at $50,000<\/a>.<\/p>\n People should generally try to avoid borrowing from retirement savings if they can, though, duQuesnay cautioned.<\/p>\n When taking any kind of loan, it’s generally wise to do so to buy “good” assets \u2014 those, like a home, that are expected to appreciate in value over time, duQuesnay said. Conversely, an auto loan is an example of debt for a “bad” asset since cars depreciate over time. Home equity is also generally people’s largest store of wealth in retirement, she added.<\/p>\n<\/div>\n![\"Financial](\"https:\/\/image.cnbcfm.com\/api\/v1\/image\/107205333-1678303940140-gettyimages-1167016662-dsc03316.jpeg?v=1678304755&w=750&h=422&vtcrop=y\")
Pros and cons of a 401(k) loan<\/h2>\n