CNN Money – Despite a fair amount of ups and downs over the past few months, the popular index of large companies is up 8% this year. And that follows a nearly 30% surge in 2013.
If you’ve had your money in the market since 2009, you’re likely very happy — and a lot richer. The S&P 500 is now up more than 200% since this bull market began in March 2009. Many people invest in retirement funds that mimic the S&P 500.
Why stocks are up: You can thank Europe for this latest surge. Comments from the head of the European Central Bank on Friday are driving today’s action. Mario Draghi, speaking at conference hosted by the Federal Reserve in Wyoming, hinted that the ECB may do more to stimulate the struggling European economy if deflation gets worse. In other words, the Band-aid is ready.
The hope is that the ECB may eventually launch a bond buying plan similar to the quantitative easing (QE) program that the Fed has been conducting since the financial crisis in late 2008.
Many market experts have stated that the Fed’s actions are the key driver of the bull run on Wall Street. The so-called QE program has helped keep long-term bond rates low — which make stocks more attractive and also enable more companies and consumers to take out cheap loans
But the Fed is currently in the process of unwinding its so-called QE plan. So investors seem excited by the fact that the ECB may be finally ready to step up to the plate and pump more money into the global financial markets.
Why have stocks have done well all year? One market strategist noted that companies have been reporting decent earnings growth and that stocks are still reasonably valued. Add in some fading concerns (for now at least) about geopolitical tensions in Ukraine and the Middle East and you have a recipe for a market rally.
“All in all, the news has been good lately. So it’s understandable that stocks are trading higher,” said William Lynch, director of investments for Hinsdale Associates, a money management firm.
Why you should care: While the S&P 500 may not get as much attention from casual investors as the Dow Jones Industrial Average — which many people still view as “The Market” — the S&P 500 is a far more important indicator of how Wall Street is doing. TheDow has only 30 stocks in it and does not include all the big companies that many consumers are more likely to recognize and invest in.
And many mutual funds that you own in your 401(k), other retirement plans or a 529 for your kid’s college savings are likely to be set up to try and beat the performance of the S&P 500.
Still, is it really all that important when a market index hits a round number? Yes and no.
On the one hand, 2,000 is a new all-time high. So that’s significant.
But in the same way that turning 40-years-old is not really all that different from 39, the S&P 500 passing 2K merely suggests that investors still believe stocks are worth buying even as prices climb higher.
It’s also important to remember the simple rules of math. As stocks continue to go up, it’s easier to hit new milestones. The S&P 500 went up 5.3% on its way from 1,900 to 2,000. But the index will only have to go up 5% from here to reach 2,100 and another 4.8% to go from 2,100 to 2,200.
Lynch noted that it’s not always wise to make much out of market moves in the sleepy days of late summer.
“You have to take this with a grain of salt. So many people are on vacation this week and volume is incredibly light,” he said.
Who the biggest winners are: A vast majority of the stocks in the S&P 500 are up this year. But what’s most impressive is that the biggest gainers come from a wide range of sectors. K-Cup coffee maker Keurig Green Mountain () is the top dog in the S&P 500 in 2014. Shares are up 75%.
But there are also airlines Southwest (Tech30), sporting apparel maker Under Armour ( ) and aluminum giant Alcoa ( ). Energy firmsNewfield Exploration Company ( ), Williams Companies ( ) and Nabors Industries ( ).\) and Delta ( ) among the top 15 gainers. So are well-known brand name firms like video game developer Electronic Arts ( ,
Tech stocks have also done extremely well. In fact, the Nasdaq is up more than 9% this year –but it is still 11% below its all-time high from March 2000.
In other words, investors have not had to bet on one market trend to do well this year. See Full Article Here
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Bloomberg - The Missouri grand jury that began considering evidence today in the police killing of an unarmed man won’t decide whether to indict Ferguson police officer Darren Wilson until October “at the earliest,” a spokesman for the local prosecutor said. Story
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Wall Street Journal – What’s the best financial advice for young people just starting to make money? The Wall Street Journal put this question to The Experts, an exclusive group of industry and thought leaders who engage in in-depth online discussions of topics from the print Report. This question relates to a recent article that discussed advising young people financially and formed the basis of a discussion in The Experts stream on Wednesday, April 24.
The Experts will discuss topics raised in this month’s Wealth Management Report and other Wall Street Journal Reports. Find the finance Experts online atWSJ.com/WealthReport.
Also be sure to watch three wealth-management thought leaders— Meir Statman of Santa Clara University and author of “What Investors Really Want,” Terrance Odean of the University of California, Berkeley, and consultant, writer and investment adviser Tom Brakke —speak about controlling your feelings when investing and explaining behavioral finance in a video chat that aired on April 23 at 3 p.m. EDT.
Manisha Thakor : Three Lessons That Can Change Your Life
There are three financial lessons that I believe can literally change a young person’s life forever. They are:
(1) Know what healthy spending looks like. Most of us were never taught what healthy spending looks like. My favorite rule of thumb comes from (Sen.) Elizabeth Warren’s book written with her daughter, Amelia Warren Tyagi, called “All Your Worth: The Ultimate Lifetime Money Plan.” The rule of thumb: 50/30/20. The idea is 50% of your take-home pay goes to needs, 30% to wants, 20% to savings. Keep that rule of thumb in mind and a young person can avoid so many classic financial mistakes.
(2) Start saving now. Those are the three most powerful words in personal finance. Who wants to be a millionaire? A lot of young people. How do you get there? By saving $5,000 a year starting at age 25, doing so every single year until you are 70 and earning 6% compound average returns. But wait until age 45 to start that savings and you’d need to sock away over $18,000 a year. Ouch! (And thanks to the ravages of inflation, if you want that to be $1 million in inflation-adjusted dollars you’d need to essentially double those savings targets.)
(3) Don’t expect to live like mom and dad right out of the gate. Thanks to the proliferation of 24/7/365 media images portraying “average” lifestyles for young people that are anything but…I’ve noticed an increasing number of young people expecting to have lifestyles like their parents within a few years out of school. To the extent you can remind yourself of the price your parents had to pay to get where they are and base your expectations on your income and not what you see in the media, you will find yourself on much more solid financial ground. Go to the Wall Street Journal for this and other great articles.
Seminars For Less brings you excellent information that retirees can use to improve their retirement years. Seminar mailers from Seminars For Less bring great audiences for financial advisors.
Seminars For Less is posting articles from websites that bring you excellent information that retirees can use to improve their retirement years.
CNBC – Marie Langworthy, 68, and her husband, Bob, 75, of Columbia, Conn., love to dine out and usually do so at least twice a week, often for dinner or a late lunch.
Marie hates to cook and tries to avoid it at all costs. “My husband prefers anything to my cooking,” she says. “The surest way to get your husband to take you out to eat is to be a lousy cook.”
“We always spend more than we’d like to or anticipate, because Bob enjoys wine or hard liquor with his meal, and I always opt for dessert,” says Marie, a retired school administrator and co-author of Shifting Gears to Your Life and Work After Retirement.
She says they could probably “save a bundle” if they ate more meals at home, but they have no plans to cut back on dining out anytime soon. “First of all, eating out has become a great American social pastime. Secondly, it allows each of us to pick and choose what we want without our needing to plan and prepare meals in advance.”
Retirees over the age of 65 bought an average of 193 meals each at restaurants last year up from 171 in 2009, according to the latest data from the NPD Group, a market research firm that tracks eating trends. That’s slightly less than adults over age 18 who bought an average of 203 meals at restaurants last year, down from 222 meals in 2009.
“In an industry that is suffering, retirees are a bright spot,” says Harry Balzer, NPD chief industry analyst. The average restaurant check for a retiree is $8.05, vs. $7.33 for other adults.
Retirees frequent fast-food places 63% of the time; 37% of the time they go to places with waiters and waitresses, he says.
When it comes to spending money on dining out, retirees have to prioritize what matters to them and budget accordingly, says Gary Schatsky, a New York City financial planner and president of ObjectiveAdvice.com. For many people, dining out feels like a mini-vacation, and they really enjoy it, he says.
Some people think having alcohol at their meal is an important part of the experience, but if you don’t buy alcohol, you can afford more dinners out,
he says. Even not drinking sodas at several meals can save a lot of money over time, he says.
Carol Miller, 74, a retired schoolteacher in Terrell, N.C., likes to order takeout from a cafe in town and bring it home “to sit in my recliner and eat.”
She spends about $12 or so on a takeout dinner, which lasts her two or three meals. It’s very economical and tastes great, she says. “I could never replicate their food.”
She also goes out to dinner regularly with several different groups of women, including some from her church, retired teachers and old friends. “For women my age, going out to eat is a sort of tribal thing that women do, and generally it’s with people you love, so you can talk to them and complain to them.
“Sometimes I think, ‘I just ate out yesterday,’ but I go ahead and go again. I don’t like to cook. It doesn’t interest me.”
Mark Fried, president of TFG Wealth Management in Newtown, Pa., says when he reviews budgets with retirees, they often make dining out a line item. “How much money they have determines where they are going to eat out.”
Some want to dine out occasionally, but others say they are “done with cooking forever and want to eat out every night.”
Many retirees are price conscious, and they want the option to order half portions, says Reimund Pitz, chef and owner of Le Coq au Vin restaurant in Orlando. “These folks can’t eat like they used to.” So Pitz offers half portions at a reduced price.
Her husband did the cooking for their family, but he passed away three years ago. Eating out is a good “way for retired people to reconnect,” Miller says. “You could very easily stay in your house and cook a grilled cheese or a TV dinner. You could become a hermit if you don’t watch out.”
Marie Langworthy says sometimes she and her husband go out for the early bird specials to save money, but they often pay the full freight. She loves eating outdoors in the summer at casual “shack-like” restaurants with high-quality food. “I also love to try different high-end restaurants, and would travel anywhere, any distance for a good meal and a new ambient experience.”
There are creative ways to eat out frequently without busting the budget. Nelson Cooney 76, of Bethesda, Md., and his wife, Joan, 78, have dinner out two to three times a week, so he searches for discounts on LivingSocial and Groupon, and they sometimes go to happy hours at restaurants where the wine is less expensive and the bar food can serve as their dinner.
“I don’t like to overspend when I don’t have to. We only use them (discount coupons) to go to places we want to go to. We don’t go places we don’t care about. We’re very selective,” says Cooney, a retired trade association executive.
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CNN Money – The S&P/Case-Shiller home price index, a closely watched measure of home values. posted a 9.3% annual increase in its May reading, down from the 10.8% rate in April. The rate of increase was as high as 13.7% in November before slowing every month since.
The good news for homeowners is that the index has now been up every month over the last two years — after posting drops almost every month over the previous five years.
And some experts say the current growth is better for the market, because rapid price increases can keep some buyers on the sidelines.
“Today’s Case-Shiller data is consistent with the slow glide-path down towards a more normal housing market,” said Stan Humphries, chief economist for real estate Web site Zillow. “Almost across the board, lower-priced homes have been appreciating more quickly than the most expensive homes, a welcome reversal from prior years.”
Prices rose in all 20 cities measured by the index, and nine of those markets posted double-digit percentage gains. The fastest growth was a 15.4% year-over-year jump in San Francisco. The most modest gain was in Cleveland, where prices rose 2.4%.
Most of the big gains were in markets in California and Florida, as well as Las Vegas. All of those markets were hit particularly hard by the housing bust that followed the home price bubble in the middle of the last decade.
A recovery in home sales and prices have been a major driver of the rebound of the U.S. economy so far this year, as the jump in prices has increased household wealth. The price increases and low mortgage rates also helped many homeowners refinance their mortgages and lower their home payments.
But even with two years of increases, prices are still 17% below the peak reached at the height of the housing bubble in early 2006.
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Bloomberg – Confidence among U.S. consumers soared in July to the highest level in almost seven years as Americans grew more upbeat about the labor market and the outlook for the economy.
The Conference Board’s index rose to 90.9, the highest since October 2007, from a revised 86.4 in June, according to the New York-based private research group said today. The gauge exceeded the most optimistic forecast in a Bloomberg survey in which the median called for an 85.4 reading.
More employment opportunities, fewer firings and resilient equity markets are buoying spirits against a backdrop of geopolitical tension in Ukraine and the Middle East. Faster wage growth would help to further spur sentiment and provide the wherewithal for bigger gains in consumer spending.
“Employment conditions improved, gas prices are lower, equity markets remain robust, and that’s pretty much it,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. “The fact that confidence is rising at a fairly steady rate implies that employment growth is going to continue at a fairly healthy rate.”
Estimates of the 75 economists in the Bloomberg survey ranged from 82.8 to 88.5 after a previously reported 85.2 reading in June.
Stocks rose, with the Standard & Poor’s 500 Index advancing 0.1 percent to 1,981.64 at 11 a.m. in New York.
Another report today showed home prices rose in the 12 months ended in May at the slowest pace in more than a year as a lull in the housing market limited appreciation. The S&P/Case-Shiller index of property prices in 20 U.S. cities increased 9.3 percent from May 2013 after a 10.8 percent gain in the year ended in April. Compared with the prior month, home prices fell for the first time in two years.
The Conference Board’s gauge of present conditions rose to 88.3, the strongest reading since March 2008, from 86.3 in June. The barometer of consumer expectations for the next six months increased to 92.7, the highest since February 2011, from 86.4 a month earlier.
The share of Americans who said jobs were currently plentiful advanced to 15.9 percent in July, the highest since May 2008, from 14.6 percent. More consumers than a month earlier said they expected greater employment opportunities and better business conditions in the six months ahead.
“Stronger job growth helped boost consumers’ assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. The figures “suggest the recent strengthening in growth is likely to continue into the second half of this year.”
Payrolls surged 288,000 in June after a 224,000 gain the prior month that was bigger than previously estimated, figures from the Labor Department showed this month. The unemployment rate dropped to an almost six-year low of 6.1 percent.
More employment opportunities will probably keep Federal Reserve policy makers on the path to reduce monetary stimulus as they begin a two-day meeting today.
The share of respondents in the Conference Board’s survey that said they expected their incomes to rise in the next half year rose to 17.3 percent in July from 16.7 percent a month earlier.
The increase in sentiment, however, didn’t translate into buying plans. Fewer respondents in the survey said they expected to purchase cars, homes and appliances in the next six months.
Some of the headwinds consumers have faced in recent months are starting to dissipate. A gallon of unleaded gasoline at the pump fell to $3.52 yesterday, the lowest since mid-March, after a high in April of $3.70, according to data from AAA, the largest U.S. motoring group.
Food costs showed signs of stabilizing in June after surging in prior months as a drought in the West and a deadly hog virus pushed up prices for beef, pork and some vegetables and fruits. Food prices rose 0.1 percent in June after a 1.1 percent surge a month earlier, according to Labor Department figures. They were up 2.4 percent from June 2013.
Progress in the labor market is keeping O’Reilly Automotive Inc. upbeat even as the second-largest U.S. auto parts retailer says challenges remain for some of its customers.
“We were encouraged by modest gains in miles driven, as unemployment very gradually improves,” Gregory Henslee, the Springfield, Missouri-based company’s chief executive officer, said on a July 24 earnings call. Even so, “our average consumer has been under pressure for a long time as a result of the slow recovery and we would not anticipate this pressure to significantly abate in the near term.”
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Fortress Investment Group LLC (FIG) has taken its clash with life insurer Phoenix Cos. (PHX)from the courthouse to the statehouses as the firm seeks to salvage a bet on policies with a face value of more than $1 billion.
The private-equity and hedge-fund manager, which purchased policies on the secondary market, has proposed rules to make it harder to cancel insurance and to mandate the return of premiums if coverage is voided. While efforts stalled in states such as Florida and Connecticut, an attorney for Fortress cited progress in Delaware where a proposal advanced from a house committee, only todie as the legislative session ended three weeks ago.
“It takes time to pass bills,” Jeremy Kudon, a lawyer for the New York-based company, said in a phone interview. “We have every intention of coming back.”
Victories could boost liquidity in the life-settlements market, which Fortress said has been chilledby concerns that Phoenix, and possibly other companies, will deny payments. The firm told lawmakers it is seeking to protect and expand a market that can aid seniors by allowing them to get more cash than their policies’ surrender value. The investors take over premium payments and count on eventually collecting the death benefit.
“Fortress sees a way to make money,” said Joseph M. Belth, a professor emeritus of insurance at Indiana University in Bloomington. “They want to enhance the value of their inventory of policies.”
Fortress spent about $330 million four years ago for a life-settlements portfolio with a face value of about $6.2 billion, a regulatory filing shows. The largest of its 2010 Life Settlements funds had a $19 million deficit as of March 31, according to a report to the Securities and Exchange Commission.
That reflects $64.9 million in assets after a $383.2 million investment, and $299.3 million in distributions. A smaller fund had a deficit of about $1.7 million.
“We’re being asked to bail out an out-of-state hedge fund,” Minnesota State Representative Greg Davids, a Republican, said at a hearing last year. “We get very nervous about passing laws that are going to affect current litigation.”
Lima LS Plc, a Fortress investing vehicle, said in a January document that it struck an agreement to exit about 80 percent of its life-settlement policies. The buyer was Apollo Global Management LLC (APO), and Fortress was left after the sale with policies tied to Phoenix, said people familiar with the deal who asked not to be identified because the transaction was private. Fortress said in court papers that it is harder to find a buyer for Phoenix policies and faulted the insurer’s underwriting.
“To get its hands on more and more premiums, Phoenix turned a blind eye to obvious application inaccuracies,” Lima said in a suit in U.S. District Court in Connecticut in 2012. “But now, to avoid paying out on such policies, Phoenix has seized on such errors, feigning false surprise about them.”
Lima cited a $10 million Phoenix policy that covered Faye Keith Jolly, a Florida man. Hartford, Connecticut-based Phoenix had sued Jolly in 2008 for fraud, saying he falsely claimed to have more than $1 billion in assets, mostly in uncut emeralds recovered from a sunken ship.
Phoenix won a judge’s permission to rescind the policy. A trust tied to Jolly said in a court filing that the policy was valid. Phoenix, which was founded in 1851 to cover people who abstain from alcohol and later insured Abraham Lincoln, said that it pays benefits on legitimate policies.
The Lima suit is a case of “buyer’s remorse through which a hedge fund seeks to lock in massive returns on a high-risk investment through judicial action,” Phoenix said in a court document.
Fortress said in its suit that it has owned policies tied to Phoenix with a face value, or death benefit, of about $1.4 billion. Part of Fortress’s statehouse push is to require that insurers respond to inquiries from prospective life-settlement investors about the validity of policies they want to buy.
“If you don’t have these sorts of rules, your investors are at risk,” said Kudon. “This market will need certainty to expand and flourish.”
Fortress faces skepticism from lawmakers like Minnesota’s Davids and Florida’s insurance watchdog about why state officials should get involved. Also, the regulator has said that changes sought by Fortress may contribute to fraud by encouraging people to take out policies with the sole intent of reselling them.
“The courts are addressing these issues,” the Florida Office of Insurance Regulation said in a December report to the Legislature. “The treatment of life insurance solely as a commodity from inception is at odds with the purpose of life insurance and may have negative ramifications.”
Fortress told the Florida watchdog that it manages assets for clients including university endowments, public pension funds and unions. The firm also said that the California Public Employees’ Retirement System invests in the market. Joe DeAnda, a spokesman for Calpers, declined to comment.
Banks have also been involved in the market, both by arranging sales or investing in the contracts. The Institutional Longevity Markets Association, a trade group that represents lenders such asWells Fargo & Co. (WFC) and Credit Suisse Group AG along with Fortress, has also pushed for rules benefiting investors.
“We want to ensure that there’s clarity and that there’s transparency and that there’s surety in what you do,” Jack Kelly, managing director of ILMA, said in a phone interview. Investors’ returns fall when insured people live longer than expected and when companies deny benefits or change policy terms.
Fortress has been working to get life-settlement rules passed for about two and a half years, focusing on states where it has the most at stake, according to Kudon. Bills in Minnesota,Connecticut and South Dakota died or were tabled, according to the American Council of Life Insurers.
The advance of the bill in Delaware caught the attention of the ACLI, which put out a statement on June 30, as the legislative session approached its close, to say there was a danger of more financial fraud if the proposal became law.
“After failing to get what they want in the courthouse for a couple years, they moved to the statehouse,” said David McDowell, a lawyer who represents Phoenix in the suit and testified for the ACLI in Minnesota.
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cnbc.com - In a dramatic split decision, two federal appeals panels disagreed Tuesday on the legality of Obamacare subsidies that gave billions of dollars to help 4.7 million people buy insurance on HealthCare.gov.
A panel of the appeals court that covers Washington, D.C., ruled 2-1 that the subsidies were and are illegal if issued through that federal exchange, as opposed to one set up by a state.
But about two hours later, a Fourth U.S. Circuit Court of Appeals panelruled 3-0 in another case that the subsidies are legal for people who buy plans on HealthCare.gov, which the federal government operates in 36 states.
The circuit split could mean the cases will soon land before the U.S. Supreme Court. For now, the subsidies remain in effect. Full Story here
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Bloomberg - Wholesale prices in the U.S. rose more than forecast in June, reflecting a jump in energy costs that is now abating.
The 0.4 percent increase in the producer price index followed a 0.2 percent drop in May, the Labor Department reported today. The median estimate in a Bloomberg survey of 69 economists called for an advance of 0.2 percent. Fuel costs climbed 2.1 percent, the biggest gain since February 2013.
Crude oil prices have dropped this month as concerns about supply disruptions ease, bolstering Federal Reserve Chair Janet Yellen’s view that recent increases were temporary. Smaller price increases indicate Fed policy makers can keep interest rateslow well into 2015. Full Story
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CNNMONEY - Taking a 401(k) loan can seem attractive for a few reasons: You don’t have to qualify. You can get the funds quite quickly. Plus the interest rate is typically around 4% to 5%, far below the typical credit card interest rate.
Most 401(k) plans allow you to borrow 50% of your balance up to $50,000, which you then must pay back (plus interest) through automatic payroll deductions. Typically, the loan must be repaid within five years.
Nearly half of all retirement savers who had taken a 401(k) loan said they had borrowed the cash to pay down debt, according to a recent survey from retirement provider TIAA-CREF.
But there are a lot of things that can go wrong.
“The 401(k) always appears to be a pretty good place to borrow from…” said Margaret Starner, senior vice president of financial planning at Raymond James & Associates. “But it’s a slippery slope.”
Not only are you raiding your current savings balance, but you will also miss out on the compound returns those funds would have gained over time.
Plus, like any other kind of borrowing, a 401(k) loan isn’t tax free. You’ll pay the loan back with after-tax dollars and then pay taxes again when you withdraw the savings in retirement.
And if you lose your job or switch to a new one, the timeframe to pay back the loan shrinks to as little as 60 days. If you’re unable to repay it by that deadline, you could be hit with another tax bill and a 10% early withdrawal penalty if you’re younger than 59 1/2.
If you’re still thinking of taking a loan to tackle debt, here are some things to consider.
What kind of debt is it? The only kind of debt you should even consider raiding your nest egg to pay down is extremely costly debt, such as high-interest credit card bills or a payday loan, said Bruce Cacho-Negrete, a certified financial planner who specializes in helping clients manage their debt.
That means that you wouldn’t want to use retirement savings to pay down loans with lower interest rates and longer time spans, such as student loans or mortgage debt.
Do you have other options? A 401(k) loan should be a “loan of last resort,” according to Cacho-Negrete. First consider your alternatives.
For example, if you have a good credit score, you might be able to pay down higher-interest credit card debt with a personal loan from a bank or credit union, said Sophia Bera, a Minneapolis-based certified financial planner.
Or if you think you’ll be able to tackle the debt in the next year, consider taking advantage of a 0% balance transfer offer to transfer the debt to a different credit card and pay it off without any additional interest payments.
Do you have a plan? Your retirement savings is not a piggy bank. So if you do take a loan, you’ll need a strategy to make sure you don’t make it a habit, said Dan Keady, director of financial planning for TIAA-CREF.
If it was overspending that forced you to raid your savings, for example, commit to a budget to make sure you don’t just run up the card all over again.
If possible, you should also try to continue contributing to your 401(k) plan up to at least your employer match, on top of paying back the loan. See the full story here