Can You Borrow Money on Maine State Retirement Funds?
Retirement plans are a key component of your financial plan. A Maine state retirement plan is one set up by the state which provides an income for you when you retire. This retirement plan differs from private plans in some key ways. One of those ways is the function of borrowing from the plan.
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Significance
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Maine does not allow borrowing from the state retirement plan. Unlike those of other states, Maine's system is not set up to accept your contributions to the pension plan and then partially refund or loan out any portion of the retirement fund balance to you while you're still working. This means the plan is somewhat illiquid when compared to private plans, which allow extensive borrowing.
Benefit
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The benefit to not allowing borrowing is that you won't ever worry about your retirement funds not being there for you when you need them. You don't have to repay any retirement plan loans, and you don't put yourself into a position where you might be penalized for failure to repay. Additionally, you do get your retirement funds if you leave your agency and do not work for the state. While the state does not issue partial refunds, they will return all contributions you make to the plan, plus accumulated interest.
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Disadvantage
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You cannot borrow from your retirement. This may prevent you from getting money you need in an emergency. The Maine state retirement plan is a qualified plan under IRS section 401a, but because the plan prohibits loans, you may find yourself in financial trouble if you rely exclusively on your state retirement as your sole source of savings.
Consideration
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You should consider saving money outside of your retirement plan. Cash value life insurance and Roth IRAs allow you to save money and access part or all of that money without paying income taxes and without paying a penalty for accessing the money. This gives you a savings which may be used during your lifetime if you need it.
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