The True Cost of a 401k Loan!

Рет қаралды 17,312

Жыл бұрын

The True Cost of a 401k Loan!
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Пікірлер: 21

@markobasi359 Жыл бұрын

I took out 15K to pay off the last of my debt a few years ago. Did a 1 year repayment plan. Im good with the decision. But I definitely see his point here.

@taylorjackson7908 Жыл бұрын

The real problem is if you become separated from your employer the loan becomes due in full. You quit, lose your job, get fired you are responsible for the balance of the loan immediately.

@kingc1198 9 ай бұрын

That why you should wait for retirement or when you depart from your employer to take the money out .if you going to take money out while employed make sure its a small amount that can be paid back in a short time

@PaigeWeso 8 ай бұрын

And if you can’t pay that loan back upon separation the money is taxed as income and if you don’t have enough set aside to pay off that higher tax rate when you file your taxes you’re in debt to the IRS.

@PaigeWeso 8 ай бұрын

But this doesn’t apply to IRAs since a loan through them is not connected to your employer.

@thebestthingthatneverhappe6729 Жыл бұрын

i took out a 26k 401k loan April 2022 when SPY was in the 430's, been paying it off steady with an average in the 390's, SPY is almost back to the amount it was when i took it out, i finish paying it off in 1 month. This 401k loan served as down payment on new condo so i could sell the first condo for $$$k profit. Sold retirement while high, bought back low, sold a house and have a 1 year old condo with 90k in equity.... that 401k loan was one of the best financial decisions i have made but timing, strategy and luck was everything... I WOULD NOT DO THIS SAME STRATEGY RIGHT NOW THOUGH

@JuanPerez-tg6ev 7 ай бұрын

I think he missed the part where the interest you pay on the loan against your 401k if yours! That interest doesn’t go back to the company, it goes back into your 401k

@davet5260 Жыл бұрын

I have been happy with my 9% interest rate paying myself. Comfortable with lost opportunity cost for 1 year.

@gobot4455 Жыл бұрын

Yup. Being your own bond holder is great.

@omark8012 11 ай бұрын

I don’t recommend borrowing from you 401k but The interest goes back to future you at roughly 7%. Seems like a better deal than paying a bank interest.

@TazG2000 Жыл бұрын

For some reason there is never any practical comparative analysis on this subject. This is acting as if the only two options are taking out a 401k loan and spending it, or doing nothing. That isn't realistic. Of course there is an opportunity cost to doing this, but there are also costs associated with a) spending your own money without investing it, b) borrowing from a bank, c) foregoing investing beforehand to avoid needing a future loan, etc. In many cases you will be ahead with a 401k loan.

@bruced.370 Жыл бұрын

And if the markets go down or crash then you just did the best thing. If paying off high interest debt then no big deal.

@dreamchaser5758 Жыл бұрын

I hear you and your points are valid. But that loan was used towards a down payment for our first home. Interest rate is less than 1%

@MbTrojansurgeon 6 ай бұрын

Actually the 401k loan for home purchase can be a reasonable option…you pay yourself back with interest. So you earn interest, and equity in your house.

@punxnotdead3873 19 күн бұрын

6k 401 12 month loan for high intrest CC , saves me over thousand dollars in intrest vs missing 500$ in gains in 12 months. Boom

@wjm988 8 ай бұрын

Does the interest in the loan go back to the contributing capitol of the 401k? Heard that once but not sure I'm remembering the right product

@deandoscher5681 Жыл бұрын

Could it be worthwhile to take out a 401k loan so that you can live off that and contribute more to a IRA, 403b or 457?

@JacobAnawalt Жыл бұрын

Are you pulling money from the 401k, or are you borrowing against it at a lower rate than an unsecured loan?

@mikelopez5217 Жыл бұрын

What loan isn’t 401k my money an not a loan

@tomoore1776 Жыл бұрын

This depends on what you use the loan for. If you’re using it to invest it elsewhere, then it can actually be beneficial as you’re not paying the high interest rates of a traditional loan.