The Stacking Benjamins Show

Episode Title: The One About 401k Loans (and How To Stay Away From Them) (SB1816)
Date: March 16, 2026
Hosts: Joe Saul-Sehy, OG, Doug
Guest/Segment Contributor: CFP Anna Allum

Episode Overview

This episode tackles the growing trend of Americans tapping their 401ks for emergency cash, discussing why using retirement savings as a rainy-day fund is so risky. Joe, OG, and Doug break down the latest alarming Vanguard data, walk through when (if ever) it makes sense to borrow from your 401k, and lay out how to bulletproof your finances so you never need to. The team also launches a new “Financial Basics for Noobs” mini-series with Anna Allum, focused on creating a sturdy financial foundation. As always, the vibe is casual, witty, and approachable—making serious money topics fun and accessible.

Key Discussion Points

1. Headline: Americans Raiding 401ks at Record Rates

[09:12]

• Vanguard data: Sharp increase in both 401k loans and hardship withdrawals.
  • Hardship withdrawals: Up from 2% pre-pandemic to 4.8% in 2024, now hitting 6%.
  • These withdrawals are not just loans—many are outright withdrawals under hardship rules.

Quote:
"Americans are seeking financial relief...a record number are turning to their retirement funds to cover emergency expenses. That’s worrying." — Joe [09:12]

Hosts’ Reactions:

• OG and Joe express concern; while more people are contributing to retirement funds, even more are pulling money out for emergencies.

2. Understanding 401k Loans and Hardship Withdrawals

[10:30 – 17:07]

Why are 401k loans such a bad idea?

• Lost investment growth: Money leaves your asset allocation, moving to low-interest cash.
• After-tax repayment: Repayments come out of after-tax income, even though contributions were likely pre-tax, making the loan more expensive.
• Quote:
  "You lose the potential return with that money...you're taking the money out of your asset allocation and putting it into a secure, fixed-income type of product." — OG [11:34]
• If you lose your job, you may owe the entire loan back immediately, plus penalties and taxes.

Hardship withdrawals: last-resort and irreversible

• Designed for catastrophic needs (imminent eviction, unpaid medical bills).
• Withdrawal is taxed as income; penalty sometimes waived, not always.
• Money is permanently gone from retirement savings.
• Quote:
  "With a hardship withdrawal, you're not even putting the money back ever...that's just, you're just gone." — OG [15:04]

3. Why People Tap Retirement Savings

[17:07 – 21:04]

Common hardship categories:

• Medical bills: Both OG and Joe urge listeners to look for hospital assistance programs instead.
• Eviction protection: Warn that by the time you're at risk of eviction, the problem may be larger than a withdrawal can solve.
• Funeral costs: Push back against the idea that big expenses are always “unavoidable” and recommend stress-testing your financial plan for emotional events.

Memorable Debate:
"Grandma died—do you really need that mahogany coffin and Detroit Lions logo? Maybe not." — OG & Joe riffing on emotional overspending [21:04–25:41]

Prepaying Funeral Expenses

• Joe shares a personal story favoring prepayment during a non-emotional time (25:19), while OG is wary about prepayment if the provider goes out of business.

4. What About Tuition & Home Purchase? ‘Never’ Land?

[28:17]

• Tuition:
  • Both strongly advise never raiding retirement for college—use student loans, let the child share the burden.
  • "This is a time to tell your kid no or let them solve it...We want to do stuff for our kids, but we have to do it within reason." — OG [29:24]
• Home purchase:
  • OG is “still pretty certain I don’t want to do that.”
  • The long-term compounding cost is massive—$50,000 withdrawn at 40 could become $1.5–3 million at retirement.

5. Future-You Thinking: Compounding Opportunity Cost

[31:51]

• Joe encourages listeners to think “in future dollars,” not just the immediate crisis.
• The “rule of 72” shows devastating long-term loss from early withdrawals.
• Quote:
  "Is buying a house right now worth losing $3 million of retirement assets?" — OG [31:51]

6. **Mini-Segment: Financial Basics for Noobs

with OG & Anna Allum**
[46:00 – 50:42]

Six Pillars of Financial Planning:

1. Cash Flow
2. Retirement Planning
3. Investments
4. Insurance
5. Estate Planning
6. Taxes

• Action item: List these out, score yourself (A–F), and use as a self-diagnostic to find weak spots.
• The pair announce a 7-week mini-series delving into each pillar, starting next week with cash flow/expenses.

Quote:
"All of those things interconnect...you make a decision here and maybe you created another problem down the line." — Anna [48:30]

7. How to Bulletproof Against Needing a 401k Loan

[50:54 – 61:38]

1. Track Expenses

• Most people don’t really know where their money goes.
• Both recommend using tools (Monarch, AI, even manual spreadsheets) and regular expense reviews.
• Quote:
  "If you haven't looked at your spending in a period of time, it's death by a thousand paper cuts...I took all my expenses, analyzed them, and realized I forgot to cancel a wine subscription." — OG [53:02]

2. Create Circuit Breakers

• Set buffer/tripwire in checking accounts to detect overspending early (Joe uses a set “tripwire” number).
• Weekly money meetings with spouse/partner.

3. Build an Emergency Fund

• This prevents credit card spiral when unexpected expenses pop up.
• Recognize that “27% interest on your credit card is a real number” and compounds quickly if used in a crisis.

4. Avoid Lifestyle Creep

• Expenses creep up silently as you maintain habits amid inflation.

• Frequent self-audits can reveal “lifestyle creep” before it’s out of control.

• Quote:
  "The $30 restaurant visit becomes $50...and now you've got this much bigger number than you did five years ago. It can be a real shock to the budget if you're not on top of it." — Joe [56:54]

8. 401k Hardship Administration: IRS vs. Plan Rules

[41:31 – 44:45]

• Doug questions how “hardship” is defined; Joe clarifies that the IRS sets a standard list, but plan administrators can narrow criteria even further and may require extra documentation.
• Not all hardship withdrawals are penalty-free; verify eligibility with your provider and HR.

9. Community & Wrap-Up

[62:28+]

• Joe encourages listeners to meet like-minded people—both at Stacking Benjamins' “BAD” (Benjamins After Dark) meetups and in local/online communities.

• Quote:
  "Having a group of five or six people is every bit as fun as a group of forty, because you can really get to know each other." — Joe [65:11]

• Closing takeaways:

  • Emergency fund is #1 defense.
  • A good budget system is essential.
  • Dig into weak spots from your personal self-assessment.
  • Most importantly: Don’t take financial advice from podcasts alone—seek a pro for your situation.

Notable Quotes & Memorable Moments

• “Hardship withdrawals should be a last resort. If you use your retirement savings for the present crisis, you mortgage your future.” — Joe [15:12]
• “We stress test the financial plan because you never make good financial decisions in the same moment you’re stressed emotionally.”—OG [21:55]
• “This is a time to tell your kid no or let them solve it.” — OG on using retirement for tuition [29:24]

Timestamps for Important Segments

• [09:12] – Headline: Americans tapping 401ks at record rates
• [11:10] – Why borrowing against your 401k is problematic
• [15:04] – Hardship withdrawals: what are they and why so dangerous?
• [17:07] – Categories of hardship and alternate strategies
• [25:19] – Debate: prepaying funeral expenses vs. DIY
• [28:17] – Home purchase & tuition withdrawals (‘never’ territory)
• [31:51] – Future-you math: Compounding lost opportunity
• [46:00] – Financial Basics for Noobs intro (six pillars)
• [50:54] – Systems to avoid needing a 401k loan: track expenses, set buffer, emergency fund
• [56:54] – Lifestyle creep and expense inflation
• [62:28] – Importance of community and “BAD” meetups

Action Steps for Listeners

1. Score yourself in each of the six basic areas: cash flow, retirement, investments, insurance, estate planning, taxes.
2. Track your expenses regularly—both with tech tools and old-fashioned review.
3. Build a true emergency fund.
4. Stress test your plan for emotional events (layoff, medical emergency, loss).
5. Resist the urge to “raid the 401k”—calculate the true long-term cost before touching it.

Tone

• Light, conversational, and humor-laced; frequent dad jokes and friendly digs among the hosts (“Maybe I am a time traveler...”—Joe [02:59])
• Serious during technical segments, but always approachable.

Resources and Further Reading

• Fast Company article (headline source) by Sarah Bregel
• Past SB episode on hospital billing and negotiation (Imani, age 19, $40,000 in bills)
• Episode with industry insider Scott Mueller on funeral planning

Next/Upcoming

• Next episode: Deep-dive with Amy Minkley on the FIRE (Financial Independence, Retire Early) movement, plus advanced emergency fund management.

Final Takeaways

• “Emergency funds and good budget systems are your best shot at never needing a 401k loan, so start there. And remember: don’t ask your fireworks guy in the Walmart parking lot for hot stock tips!” — Doug [34:22]
• The stakes for raiding retirement funds are huge—think millions lost in future value for quick relief today.

(End of summary)