Why do people have to pay back money they take out from their retirement, it’s their money right?
In: Other
Nobody mentioned a 401k loan yet, so if that’s what you’re talking about (and your plan allows it), you essentially take a loan out against the balance (up to 50k) and have to pay it back plus an interest rate (often +2 to the prime rate) “to yourself”. If you default on the loan it becomes a taxable distribution, and you need to pay taxes on the remaining unpaid balance. Plus an excise tax if you’re under 59.5.
(Based on my employment in the retirement sector in the USA only)
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