The Clark Howard Podcast – May 19, 2025 Episode: The True Costs Of 401(k) Loans / Checked Bags - Lost & Found
Introduction
In this insightful episode of The Clark Howard Podcast, host Clark Howard delves into the intricate world of personal finance, addressing the true costs associated with borrowing from 401(k) plans and offering practical advice on travel-related financial decisions. With engaging discussions, expert advice, and real-life caller scenarios, Clark empowers listeners to make informed financial choices.
The True Costs of 401(k) Loans
Clark opens the episode by tackling a potentially uncomfortable yet crucial topic: borrowing against your 401(k). He emphasizes the importance of understanding the long-term implications of such decisions.
“When you take out a 401k loan, you are having what's known as opportunity cost where you no longer have that money in there. And two years out of three you're going to have a nice gain on your account from what the market generally does going up.”
[03:45]
Clark underscores that withdrawing funds disrupts the compound growth essential for retirement savings. Additionally, he highlights the behavioral pitfalls, such as reducing automatic contributions while repaying the loan, leading to a double financial setback.
“Using it as your mad money fund sabotages your future for your present.”
[05:10]
He strongly advises against using 401(k) loans for non-essential purchases like cars, boats, or vacations, framing it as a detrimental habit that can jeopardize long-term financial stability.
Caller Questions and Advice
The episode features several callers seeking personalized financial advice, each shedding light on diverse financial challenges.
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Jenny from Kansas – Custodial Roth IRA for a 9-Year-Old
Jenny inquires about starting a custodial Roth IRA for her 9-year-old, who is keen on investing.
“As long as you document that your child is actually doing the work, you pay them a paycheck, take the money, they put it in the custodial Roth, I think you're just fine.”
[06:36]Clark commends Jenny’s proactive approach and reassures her about the legality and benefits of involving her child in a family business to fund a Roth IRA, drawing from his personal experience with his children.
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Tyler from Florida – Health Insurance for an Adult Child
Tyler seeks solutions for maintaining health insurance for his soon-to-be 21-year-old daughter after she loses Tricare coverage.
“The alternative, and I want you to compare it for your daughter is to buy a policy for her on the Obamacare exchange because at least for now she will qualify potentially for a free or really cheap policy...”
[08:15]Clark suggests exploring the Affordable Care Act (Obamacare) exchanges as a cost-effective alternative, emphasizing the importance of maintaining coverage for ongoing mental health treatments.
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John from South Dakota – Business Bankruptcy and Tax Issues
John’s family member faces bankruptcy due to embezzlement, leaving their financial and tax records in disarray.
“It's going to be in his case hiring an enrolled agent. An enrolled agent is somebody who is registered and licensed to represent with the IRS.”
[11:07]Clark advises hiring an enrolled agent to navigate the complex tax situation, highlighting the necessity of professional assistance in resolving such financial crises.
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Sherry from Florida – Gigsky and Cruise Wi-Fi
Sherry questions the legitimacy of Gigsky’s affordable Wi-Fi offerings for cruises.
“Going to buy one that specifically works on cruises... But you do not get unlimited data. This is just for staying in touch, for reading your email and texting...”
[20:23]Clark explains the functionality and limitations of Gigsky’s eSIMs, advising on their appropriate use for limited data needs during cruises.
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Dave from Connecticut – FDIC Insurance Limits
Dave seeks clarification on FDIC insurance coverage across multiple accounts within the same bank.
“You can stretch the insurance per institution and how you title an account...”
[23:05]Clark clarifies that FDIC insurance limits apply per ownership category, not per account, and recommends spreading funds across different account types or institutions to maximize coverage.
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Robin from Ohio – Private Equity and Restaurant Chain Acquisition
Robin shares a story about a beloved local restaurant chain in Ohio being taken over by a private equity group, leading to job losses. However, an independent group from Michigan steps in to revive the restaurants under a new name, reinstating former employees.
“What good has private equity done somewhere in the United States? Could somebody with a PE firm tell me where it's not been horrible for the public and horrible for the workers...”
[25:15]Although Clark appreciates the entrepreneurial spirit behind Robin’s story, he expresses skepticism about private equity’s role, questioning the benefits and urging private equity advocates to share positive examples.
Checked Bags and Lost & Found
Shifting gears, Clark offers travel-savvy advice on managing checked baggage to avoid the hassles and costs associated with lost luggage.
“You can avoid all those horrific baggage fees... but let's say you have status and you avoid the baggage fee or you got one of those cards that covers one bag for you...”
[16:23]
Clark recommends using AirTags or their competitors to track checked bags, highlighting technological advancements that airlines are now embracing to improve baggage handling. He shares a compelling story about a woman who used an AirTag to locate her lost bag, emphasizing the practicality and peace of mind these devices offer travelers.
“It's a lot easier for me, but when I travel to a cold weather climate... I am able to pack for 10 days without breaking a sweat in a carry-on bag.”
[17:10]
He encourages listeners to utilize tracking devices and provides resources on his website, ClarkDeals.com, for finding deals on travel accessories.
Conclusion
Clark Howard wraps up the episode by reinforcing his mission to empower listeners with actionable financial advice. He invites listeners to engage with ClarkDeals.com for exclusive offers and to stay tuned for future episodes packed with tips to save more, spend less, and avoid financial pitfalls.
Key Takeaways:
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401(k) Loans: Significant opportunity costs and behavioral setbacks make borrowing from 401(k) plans a risky move that can hinder long-term financial goals.
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Custodial Accounts for Children: Encouraging children’s financial literacy and investment through custodial Roth IRAs can set them up for future financial success.
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Health Insurance Alternatives: Utilize Obamacare exchanges to find affordable health insurance options, especially when traditional plans like Tricare are no longer available.
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Professional Tax Assistance: In complex financial crises, such as business bankruptcy due to embezzlement, hiring an enrolled agent is crucial for tax resolution.
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Maximizing FDIC Insurance: Spread deposits across different ownership categories or institutions to fully utilize FDIC insurance limits.
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Travel Smart: Use tracking devices like AirTags to manage checked baggage efficiently and avoid the stress and costs of lost luggage.
For more advice and exclusive deals, visit www.clark.com and www.clarkdeals.com.