With the CARES Act you are allowed to defer 401k loan payments for a period of 1 year. Today we will look at why it is ok to defer this over something like a student loan if you can afford to begin payments on your student loan.

We’re an investing service that also helps you keep your dough straight. We’ll manage your retirement investments while teaching you all about your money.

—Ready to subscribe—

For more information visit:

— Instagram @jazzWealth

— Facebook

— Twitter @jazzWealth

Business Affairs 📧Support@JazzWealth.com…(read more)

LEARN MORE ABOUT: 401k Plans

REVEALED: Best Investment During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing

As we all know, a 401k is a retirement savings plan that is offered by employers to their employees. It provides employees with an opportunity to save for retirement by contributing a portion of their salary before tax. However, sometimes emergencies arise that require immediate financial attention, and many people may turn to their 401k plans for liquidity.

To mitigate the risk associated with such plans, employers may offer employee loans to enable them to access a portion of their 401k savings, and repay it through deductions from their payroll. While this option may be convenient, unforeseen circumstances or changes in personal circumstances may affect an employee’s ability to repay their 401k loan as agreed.

Fortunately, the IRS recognizes that such circumstances may arise, and permits employees to defer their 401k loan payments when faced with financial difficulties. This is especially important during the current pandemic, as many people may be struggling to stay financially afloat.

If you find yourself in such a situation, it is crucial that you reach out to your 401k plan administrator or employer to discuss deferral options. Many employers offer up to 12 months of deferment, which means the payments will be suspended for a period, but the loan will continue to accrue interest.

It is important to note that while deferring 401k loan payments may provide some relief in the short term, it may have long-term consequences. Deferring payments may lead to increased interest payments, affect your credit score, and impact your ability to save for retirement in the long run.

Furthermore, if you leave your employer or lose your job, the outstanding loan balance will become due within a short period, usually 60 days. If you fail to repay the loan, the outstanding balance will be considered a withdrawal, and may be subject to taxes and penalties.

In conclusion, deferring 401k loan payments may be an option during tough financial times. Still, it is important to exercise caution and carefully consider the long-term implications before making a decision. If you are struggling financially, it may be beneficial to seek advice from a financial advisor or a credit counselor. Remember, saving for retirement should always be a priority, and your 401k plan may provide the foundation for a secure financial future.