One of our readers recently asked about Vanguard’s view on 401(k) loans.
As you might know if you’ve poked around Vanguard.com, we generally frown upon retirement plan loans, to put it mildly. In fact, Vanguard’s intranet for employees recently featured an article cautioning us against borrowing from our own retirement accounts.
Thank you for all of your comments on my “Generation D” blog post. We heard from students, recent grads, parents, and investors. Your comments were insightful and passionate, and pointed to several major themes.
Some of you admitted to, or alluded to, confusion over the terms of student loans and the implications of those terms. “Read the fine print” was the phrase that struck me. (I was looking at a promissory note from Sallie Mae this week, and it’s not an easy document to get through.)
Graduation season is upon us. Many of us have children, grandchildren, or acquaintances sailing out of school … and hitting pretty rough seas in the job market.
I had planned to speak to my sons about investing once they graduate. But while investing is undeniably important, I think a better discussion would be around debt management.
Trying to understand the global financial crisis? Confused by derivatives and default swaps and the commercial paper market?
Here are three ideas to explain it all: cheap money, surging debt, and bad credit.
Recipe for financial chaos: Take one large economy. Add cheap money—the lowest yields in 40 years. Encourage households to rack up big debts without any attention to long-term ability to repay. End result: a surge in credit card and mortgage debt, driving a consumption and housing boom in the economy. A big-screen TV, a new car, a bigger house, maybe even a vacation home—all available for “no money down” and with “low monthly payments.”
