Don’t let easy money create hard times. 

As seen in The Oakland Press

June 14th, 2026

Don’t let easy money create

hard times.

by Ken Morris

Nothing seems to be inexpensive these days. And while America’s consumers may be startled, it doesn’t seem to be slowing them down. All indications show they continue to spend at record levels. I’m a bit surprised, but not shocked. There are many ways to spend money you don’t readily have available. Easy money. Doing so may provide short-term financial comfort, but it can also create long-term financial problems.

The most obvious is using credit cards. When you buy with a credit card it doesn’t mean you have money in the bank. But every time you swipe, you promise to pay your bill in about 30 days.

If you can’t pay it in full, you’re adding interest to your debt. And if you don’t pay it off in full every month, it’s time to face reality and quickly cut back on your spending. Make adjustment to your lifestyle and get your financial house in order.

But credit cards aren’t the only way people are getting their hands on additional spending money. When things get tight, many make the unfortunate decision to get a loan from their 401(k) retirement program. According to Fidelity, one of the nation’s largest financial record keepers, nearly 20% of participants have a loan. And several other retirement plan administrators show similar statistics.

As an advisor, I do not like to see loans taken from retirement plans. The outcomes of this practice are rarely pleasant. Based on my experience, while such a loan may temporarily mask a financial issue for a short time, borrowers inevitably find themselves behind the eight ball in a matter of months. Unless, of course, they make significant changes to their spending.

We’ve recently seen a wave of job layoffs across the country. If you’re laid off with a loan balance on your retirement account and you don’t pay it back when due, you have defaulted on that loan. That’s bad news. You now have to pay income tax on the entire loan balance. And if you’re under the age of 59.5, you will also have to pay a 10% penalty to the IRS.

The reality is that a lot can go wrong with a 401(k) loan, and it’s an avenue I do not recommend. Remember, money was intended for your golden years and not meant to be a piggy bank. That’s why I have always encouraged households to have cash funds available in the event of an emergency.

I have also recently seen many advertisements encouraging seniors to sell their life insurance policies if they don’t need them. I suspect a lot of retirees are selling, not because they don’t need to, but because they do need the money just to make ends meet. Selling or cashing in a life policy can be a slippery slope, and as with a retirement plan loan, there could be adverse tax consequences.

The tax law says that, in the event of death, life insurance proceeds are income tax free to the beneficiaries. But before death it isn’t so cut and dried. Life insurance with cash values can be difficult to understand. Before you consider either selling or cashing out of your policy, I strongly encourage you to review the tax ramifications with your advisor.