How to Borrow From Pension Funds
Though a pension is generally reserved for retirement use, unforeseen circumstances and financial considerations may prompt the need to borrow from it. If you are faced with either of these scenarios, knowing how and when to borrow, including your limitations, is vital particularly if you need money fast. However, because of the risks involved with borrowing from your pension, careful consideration should first be given to other options.
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Instructions
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Calculate how much you need to borrow, and decide whether your situation is dire enough to borrow from your pension. Find out how much is in your pension by contacting the company that handles your pension.
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Research pension funding companies since you will only be able to borrow from your pension through one. Consult an independent financial adviser before applying for a loan.
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Complete the application process with the pension funding company. Submit your credit report along with your application
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Wait a few weeks, usually two to four, to receive your advance.
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Tips & Warnings
Borrowing from a pension is only available through pension funding companies.
Unlike borrowing from 401k plans, which don't require a credit check, pension funding companies require a solid credit history before issuing advances.
Set up a bank account if you do not have one. Pension funding companies typically like to deposit approved advances into an account.
Check with your financial adviser about paying taxes on your pension advance as the tax status for certain individuals may preclude them from this obligation.
Early withdrawals from your pension may be subject to state and federal income taxes. A 10 percent penalty tax may also be applied if you are under the age of 60.
Some pension funding companies request that they be added as a beneficiary to an insurance policy.
Your pension is recoupable even if you are separated from the employer who provided the pension plan.,
