Here's the Only Way You Should Borrow From Your 401(k)

NEW YORK (TheStreet) -- Anyone with a home or rental payment and a mountain of bills on top of that can relate to the temptations of borrowing from your 401(k).

The fact is, though, you shouldn't do it -- at least almost never.

Not many people take a loan from their 401(k) plan. According to a recent study from TIAA-CREF, only 29% of Americans have, and of those, 44% say they "regret the decision."

"Paying off debt was the top reason for taking out a loan from retirement plan savings, cited by 46% of respondents, yet only 26% of respondents said paying off debt was a good reason to take out a loan," TIAA-CREF says. Women were more likely to take out a 401(k) loan, by a 51% to 42% margin over men.

Also see: Debt Is Dragging Down the American Dream

Pamela Yellen, a consumer financial consultant and two-time New York Times best-selling author, says the 401(k) has replaced mortgage lending as a "pricey piggy bank" with huge costs for those who borrow from their plans.

"Just because you can take a premature withdrawal or a loan from your 401(k) doesn't mean it's a good deal," she says. "The Internal Revenue Service collected $5.7 billion in 2011 from penalties, meaning that Americans took about $57 billion from retirement funds that they weren't supposed to."

Yellen adds there are many strings attached to borrowing from a 401(k) plan, including how much you can borrow, what you can borrow it for and how and when you must pay it back. "And if you leave your job for any reason, you'll typically have to pay the loan back in full, with interest, within 30 to 60 days or you'll owe taxes and penalties," Yellen says. "And you thought it was your money!"

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