In the first half of 2010, 17.5% of 401(k) participants had loans outstanding in their accounts and 2.1% of participants took withdrawals from their 401(k) plan paying a 10% penalty on top of taxes to Uncle Sam.
When taking out a 401(k) loan, you also run the risk of needing to pay the loan back in full within 60 days if you leave your job. If you are unable to pay back the loan, income taxes and the 10% penalty must be paid on the loan amount. To read more on this, click on the following link: Yahoo Finance.
INVESTMENT LESSON: Raiding a 401(k) plan will only serve to delay retirement! No amount of financial planning can overcome spending retirement funds prior to retirement.