- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Borrow from 401K vs conventional loan???
Posted on 11/9/13 at 7:53 am
Posted on 11/9/13 at 7:53 am
Contemplating a major purchase and will likely borrow some money. No issues with credit or access to other loans but I would like some opinions on borrowing from 401k. Loan would be 5% of current 401 balance. My diversification strategy is to have 5 to 10% in stable value funds that typically return a lower rate than I would pay on the amount I borrow from myself. I would just move this portion of my portfolio out and keep the current strategy for the balance.
What does the money board say, am I overlooking something?
TIA
What does the money board say, am I overlooking something?
TIA
4
Posted on 11/9/13 at 9:21 am to HSV Tigah
It's hard for me to think of a scenario where taking money out of 401k makes sense..unless you desperately needed money to live on.
Posted on 11/9/13 at 11:44 am to HSV Tigah
quote:
am I overlooking something?
Probably. Did you consider these points?
Although you are repaying yourself, you also are committing 401 money to a loan that you could have invested elsewhere, it isn't "free money" at all b/c you are missing out on that investment income.
You are taking out money you didn't pay tax on, and repaying with money that is after-tax.
If you lose your job the full amount of the loan is due immediately.
Posted on 11/9/13 at 4:24 pm to HSV Tigah
What is interest rate difference between 401k loan and outside source?
Does your company actually remove the funds, or do they simply loan you money against your balance?
Does your company actually remove the funds, or do they simply loan you money against your balance?
Posted on 11/11/13 at 6:26 pm to HSV Tigah
Unless I am mistaken, you can not contribute to the 401k until the loan is paid back.
A couple of things to think of you will have to liquidate some security to get the cash to loan to yourself. That security may go up the time the loan is outstanding.
The money you would be contributing while the loan is outstanding is also an opportunity cost of the loan.
A couple of things to think of you will have to liquidate some security to get the cash to loan to yourself. That security may go up the time the loan is outstanding.
The money you would be contributing while the loan is outstanding is also an opportunity cost of the loan.
Posted on 11/11/13 at 6:38 pm to StrangeBrew
Thanks for the feedback. I was uncomfortable with this approach and this validated my concerns. Small relative loan amount, will just go conventional secured.
Posted on 11/12/13 at 7:13 am to StrangeBrew
quote:
Unless I am mistaken, you can not contribute to the 401k until the loan is paid back.
With merril Lynch I know you can contribute to your 401k while still paying the loan back. The money for the loan is pre-tax. I know because I did this a few months ago. The only thing you lose is the interest gained on what money you take out.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News