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re: Borrowing from your 401K
Posted on 7/10/13 at 11:28 am to ZereauxSum
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.
1
Posted on 7/10/13 at 11:36 am to LessofLes
It sounds like you're going into it with your eyes open. My plan doesn't prevent contributions when a loan is outstanding, but it does have restrictions on early payments while still employed. Pretty cool that yours doesn't.
Depending on the purpose, I'd consider doing it myself. I've come to believe that personal finances are never a black and white issue and there are no universally good and bad actions.
You're right about the tax implications (you're paying it back with after tax dollars regardless of who you borrow from) but just wanted to point that out. Some people don't want to forfeit the tax advantages of their retirement accounts.
Good luck!
Depending on the purpose, I'd consider doing it myself. I've come to believe that personal finances are never a black and white issue and there are no universally good and bad actions.
You're right about the tax implications (you're paying it back with after tax dollars regardless of who you borrow from) but just wanted to point that out. Some people don't want to forfeit the tax advantages of their retirement accounts.
Good luck!
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