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Life happens and you can find yourself faced with big, unexpected expenses. An expensive car repair, a medical emergency, or travel expenses to a funeral can challenge even the best-planned budget. Other large expenses can be anticipated: a new roof for your 30-year-old home, a used car for your teenager, an age milestone vacation, a 25th wedding anniversary party, or a child’s wedding.
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When faced with a large expense, employees with a 401(k) or 457 plan may consider taking a loan from their retirement savings to fill the gap.
Check out the new ORS eLearning module Journey to Retirement: Loans from your 401(k) to explore the decisions that three friends made when faced with large expenses.
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Consider all your options when faced with a big expense.
Save in advance
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Sinking fund. Create a sinking fund to save for expected expenses: vacations, graduation parties, anniversary celebrations, weddings, and home remodeling.
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Emergency fund. An emergency fund keeps you from going into debt when an unexpected expense comes up. An emergency fund can cover expenses that you don’t budget for like car repairs, medical emergencies, job loss, home repairs, and family emergencies.
Loans
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Loan from your retirement savings. Taking a loan from your retirement account can create financial bumps in your road to retirement. If you are considering taking a loan from your retirement account, log in to your Voya account at Voya.com to learn how a loan will impact your retirement income.
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Home equity or secured personal loan. A home equity loan allows you to use the equity in your home to secure a low cost loan. A secured personal loan is backed by your collateral, such as a car or a home.
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Other types of loans: Consider other types of loans: personal loans, home loans, and car loans.
Share the expense
- Rather than pay for a child’s wedding by yourself, work with the engaged couple to establish a budget and set clear expectations of what you can contribute.
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Caring for family member. Ask siblings to contribute to the care of your parent rather than taking on all the expenses yourself. Consider how your parent’s assets can be used to assist with their care.
Big expenses are a fact of life that you can address without impacting your retirement savings.
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Helping you along your retirement journey
Upcoming topics
• Start where you are. It doesn't matter when you start saving, just start.
• Social Security. What does it mean for me? When is the right time to apply?
Past topics
• Saving wisely, budgeting to save, and having monetary goals.
• Investing in yourself: financial advisors, creating better saving habits, more.
• Saver's tax credit: tax savings for those who need it most.
• Retirement catch-up: IRS catch-up contributions, with system-specific content.
• Deciding your retirement age, getting ready for retirement.
Find this information and more on the Michigan Office of Retirement Services’ Women & Retirement website.
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