Don't do it...
Columbia County government employees have a new means to cope in the midst of tough economic times: dipping into their retirement fund.
The option, which allows county workers to loan themselves money from their 457 Deferred Compensation plans, was approved Tuesday by county commissioners. It's an opportunity that has received some interest from county employees lately. Some, though, warn against taking such a step.
"What concerns me is that people might not understand what they're doing to themselves in the long run," said Georgia Bank & Trust Assistant Vice President Terri Jenks. "If they don't pay it back, for whatever reason, they cut their retirement money way down. What will they do when they're 65 and their monthly income is a lot less than when they were working?"
Though it is not a common practice, Ms. Jenks said last week that some people do borrow against their retirement plans during a financial crisis. Previously, county employees could seek an early withdrawal of their retirement funds only for emergency purposes, including foreclosure or medical expenses, said county Human Resources Manager Marcia Lowry.
Now, employees essentially can loan money to themselves without penalty, so long as the loan is repaid.
"This is probably becoming more common today because the economy is in serious trouble," Ms. Lowry said. "We want to make sure there is a vehicle for our employees to access money in the event that they need it.
"Hopefully, they won't get to the point of a foreclosure before they have funds available to help them out."
A caveat to the retirement loan program is that the loan must be paid back with interest -- the current prime rate plus 0.5 percent. Only those with at least $2,000 in the 457 plan can qualify for a loan. There is a $1,000 minimum loan amount and a $50,000 maximum. Loans must be repaid within five years, and just one loan at a time can be made against the account.
Because it is a loan, the money won't be taxed unless the conditions of the loan are not met, Ms. Lowry said.
"If they don't pay it back, or they were to leave or terminate employment, then it would be just like them getting an early withdrawal and they would be subject to taxes and/or penalties," she said.
Reach Donnie Fetter at (706) 868-1222, ext. 115, or donnie.fetter@augustachronicle.com.
IN OTHER ACTION
- County commissioners eliminated two management positions. The Management Service director and Engineering director positions no longer exist on the county's payroll.
Neither of those positions was staffed.
Commissioners promoted Scott Johnson from assistant administrator to deputy administrator and made him responsible for human resources, Internet technology and other departments.
Fleet and risk management services now will be managed by Emergency Services Director Pam Tucker.
Finance Director Leanne DeLoach will take over procurement and property acquisition.
Traffic engineering and landfill departments go to Construction and Maintenance Director Scott Herring.
The Management Service director and Engineering director were salaried at $101,714 and $154,585.
- Commissioners accepted the early retirement of former Planning Director Jeff Browning. County Administrator Steve Szablewski will serve as interim director.
-- Donnie Fetter, Columbia County bureau chief
Comments
Don't do it...
The most important thing you can do in a 401K is market timing. I provide it to folks but you can also use a very good method called winter/summer. To learn how to do it read Sy Harding's book "beating the market the easy way". Doing the winter/summer timing helped me to retire at 51. Don't believe the lie that the market can't be timed. A good slogan is; "If you want to work when you are old , do buy and hold". Simple winter summer would have saved folks all these recent losses.
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