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Posted on 7/10/13 at 4:41 pm to ZereauxSum
FWIW my plan treats 401k loans as a simple loan that uses your 401k as collateral. A loan does not reduce my balance or prohibit continued contributions. I simply pay the overall plan back at a very low interest. It provides a great avenue to consolidate higher interest debt or even finance certain items.
Posted on 7/10/13 at 5:12 pm to HurricaneDunc
This, I'm using a 401K loan to pay back student loan debt. I don't care what B-School you went to if you are paying yourself 4% that's a lot better than paying someone else 8%. The fact that your using post tax dollars is irrelevant. You'll be using post tax dollars either way. In my case it will save me $15K in total payments. There are certainly occasions where a 401K loan is acceptable under the assumption you can make the payments and don't default.
This post was edited on 7/10/13 at 5:15 pm
Posted on 7/10/13 at 7:05 pm to JPLSU1981
quote:
Of course you wouldn't, I just find that the easiest way for someone to understand that the commonly used "401k double taxation" is a myth.
Yeah I know that's why the "
". Your advice is spot on.
Posted on 7/10/13 at 7:17 pm to El Josey Wales
At what rate can you get a conventional loan ?
Or any other loan.
Consider 401 borrowing last, likely you will get a different solution.
Or any other loan.
Consider 401 borrowing last, likely you will get a different solution.
Posted on 7/10/13 at 7:22 pm to Sigma
Good link, and the comments in there from Jon/Golfer/Bayou are more on target than those who are disagreeing
Posted on 7/10/13 at 9:45 pm to geauxbears08
quote:
Not exactly. You paid back your loan with after-tax dollars. That's a huge penalty.
Bingo
Posted on 7/10/13 at 10:33 pm to nelatf
The problem with this thread is that everyone assumes 401k loans function the same way in every plan
Posted on 7/10/13 at 10:46 pm to nelatf
quote:
quote:
Not exactly. You paid back your loan with after-tax dollars. That's a huge penalty.
Bingo
I can almost see JPLSU's head exploding.
It reminds me of the South Park episode making fun of global warming where everyone keeps mindlessly repeating, "You can't go out there. You'll freeze to death!"
Posted on 7/11/13 at 8:46 am to HurricaneDunc
quote:
The problem with this thread is that everyone assumes 401k loans function the same way in every plan
This is true, in my plan you dont have to stop contributions and the biggest potential downside is that whatever principal value thats been loaned out is not gaining(or losing for that matter) along with the other invested monies. The interest rate on that allotment is simply what interest rate you are paying for the loan. Its entirely conceivable that in the tough times your "payment to yourself" will be greater than the actual market return. Sure, you'll pay taxes at retirement on money paid in loan interest thats already been taxed once before. That's a cross I'm willing to bear when you consider that money in my pocket today is worth a hell of a lot more than those 30 years from now...
This post was edited on 7/11/13 at 12:53 pm
Posted on 7/11/13 at 12:01 pm to El Josey Wales
quote:
He also couldn't figure out his deduction form at work yet he calls this guy a dipshit.
There's no reason for name calling here.
I may have jumped the gun on my reply to him. Perhaps he was calling the former coworker I mentioned in the OP the dipshit. In that case, I apologize to him for my defensive response.
If he was calling me a dipshit for contemplating using my own money for business purposes, then my response stands.
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