Taking 401(k) loans during the empty nest years represents a critical mistake as retirement approaches. With perhaps 10–15 years until retirement, compound growth opportunity remains significant but is limited compared to earlier life stages. Every dollar borrowed sacrifices crucial growth during your final high-earning years, when contribution capacity peaks.

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The math is unforgiving:

• $25,000 borrowed at age 50 could grow to $65,000 by retirement at age 65 (assuming 7% returns).

• That $40,000 difference represents real retirement income lost.

 

The job-change risk intensifies during this period: corporate restructuring, forced early retirement, or voluntary career transitions become more common. Loan balances become immediately due upon termination, forcing repayment when it may be least affordable—or converting to a taxable distribution plus penalties.

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This life stage should focus on maximizing retirement savings, not depleting them.

Catch-up contributions (additional $7,500 annually for those 50+) offer an opportunity to accelerate retirement readiness; borrowing undermines this advantage.

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If facing financial pressure during empty nest years, explore alternatives:

• Reduce discretionary spending

• Delay major purchases

• Tap home equity at lower rates, if necessary

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Protect retirement accounts at all costs during these final accumulation years. The peace of mind from avoiding retirement account loans far exceeds any short-term convenience. Focus on entering retirement with maximum account balances to support potentially 30+ years of retirement living.