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Message
re: Borrowing from your 401K
Posted on 7/10/13 at 11:13 am to LessofLes
Posted on 7/10/13 at 11:13 am to LessofLes
It could potentially be a good move, just go into it understanding everything that will or potentially happen.
So plans have a rule where you are not allowed to make contributions until a loan is paid back.
Also, if your employment situation is shaky it might not be smart. The worse thing that can happen is you get terminated and the IRS hammers you.
Also keep in mind that you are essentially paying taxes on the money twice...once when you pay it back with after tax dollars and again after you retire.
Just make sure you have enough info to make an objective decision.
So plans have a rule where you are not allowed to make contributions until a loan is paid back.
Also, if your employment situation is shaky it might not be smart. The worse thing that can happen is you get terminated and the IRS hammers you.
Also keep in mind that you are essentially paying taxes on the money twice...once when you pay it back with after tax dollars and again after you retire.
Just make sure you have enough info to make an objective decision.
1
Posted on 7/10/13 at 11:28 am to ZereauxSum
Thanks for the info.
Our plan allows for continued contributions while loans are active and there is no penalty for paying it back sooner than terms. I understand paying it back with after tax money (I'd pay a business loan back with the same after tax money).
I get that I'll pay tax on it again when I use it in retirement and that I lose potential market gains while the balance is in my hands and not in funds. However, you have to pay to play at some point so that's the penalty I'll have to accept.
Employment is secure. The loan could potentially be for 18 months and I could repay the balance with bonus money EOY 2014.
Our plan allows for continued contributions while loans are active and there is no penalty for paying it back sooner than terms. I understand paying it back with after tax money (I'd pay a business loan back with the same after tax money).
I get that I'll pay tax on it again when I use it in retirement and that I lose potential market gains while the balance is in my hands and not in funds. However, you have to pay to play at some point so that's the penalty I'll have to accept.
Employment is secure. The loan could potentially be for 18 months and I could repay the balance with bonus money EOY 2014.
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