loan out on 401k?

[Homerboy]

I thougth I recall someway that you can take a loan out on your 401K and pay it back to yourself + interest? Or was I simply dreaming this?

 

[PricklyPete]

Is definitely an option, but your 401K provider has to do it...and not all plans provide this feature. My company uses Fidelity to handle all of its 401K plans and Fidelity lets you setup the loans over the internet.

 

[FoBoT]

check with your HR rep or your HR intranet site

 

[Homerboy]

yeah my old employer (who the 401k was set up with and I rolled it out of when they closed) used Fidelity. The website was fantastic!

 

[Homerboy]

This 401k Is not through work (not anymore). I've tossed an email to my advisor over at MONY (now AXA), but thought I'd pick your guys' brains too.

 

[Syrch]

yeah its an option, the company may actually push you to do it.

 

[cKGunslinger]

Fidelity (www.401k.com) website is awsome and convenient for doing such, if your employeer and plan offers it. I wouldn't do such a thing lightly, as it's too easy to view it as a easy source of money after a while. I have taken about 4 loans from mine over the past 5 years. On was for a house down payment, the others for quick cash. Only do it if you need it, or else you are robbing yourself.

 

[Homerboy]

you know... I meay be SOL here. I had the 401k but when the previous employer closed its doors we had to roll it over. So its sitting in an IRA now. Cr@p!

 

[LikeLinus]

I just looked. I can take up to 50% of my 401K out with a 7% interest payments. I never knew that. I'd never do it though.

 

[waggy]

yeah i thought you could take it out for such things as Downpayment on a house or financial hardships (such as majore medical bills etc).

 

[Queasy]

Originally posted by: LikeLinus
I just looked. I can take up to 50% of my 401K out with a 7% interest payments. I never new that. I'd never do it though.

Yeah, pretty much every financial advisor advises against taking out loans against your 401(k).

 

[StageLeft]

I once needed money bad and borrowed $5k out of mine at a 40% interest rate, money due back in 60 days. I couldn't get the money back in time though so I sent Tony out to kick my own ass and he did. I'll never borrow money from myself again because I'm a real dick if I don't get my money back in time and now I own my ass, sending myself to do odd jobs and crap. It sucks.

 

[Sundog]

Originally posted by: Homerboy
you know... I meay be SOL here. I had the 401k but when the previous employer closed its doors we had to roll it over. So its sitting in an IRA now. Cr@p!

There is nothing wrong with it in an IRA. Hell, you normally have more contol and more choices in an IRA.

 

[labgeek]

It's very situational... If you're sure that it can be paid back (defaulting means early withdrawl = taxes + penalties), and it's a better rate than you'd get elsewhere it MAY be worthwhile. But watch, some plans may require you to move some or all of the borrowed against balance (usually + like 20% to cover the taxes if you default) into a safer option. That means not only will you pay for the interest (plus possibly fees), but your money may (WILL) earn a lot less during the life of the loan.

 

[PricklyPete]

Originally posted by: Queasy

Originally posted by: LikeLinus
I just looked. I can take up to 50% of my 401K out with a 7% interest payments. I never new that. I'd never do it though.

Yeah, pretty much every financial advisor advises against taking out loans against your 401(k).

This is true. You have the chance of defaulting on the loan if you lose your job or go to another job which could result in you having to pay the full amount or have tax/penalties due. You also are losing out on any increases in value the money may have had during the loan period. Additionally there are fees and whatnot.

All that being said...it is better than paying someone else high interest (read credit cards).

 

[CPA]

Originally posted by: LikeLinus
I just looked. I can take up to 50% of my 401K out with a 7% interest payments. I never knew that. I'd never do it though.

Why? If you have some debt with interest rates above 7% and the market is flat, it only makes sense to. There is definitely a time to use 401k loans no matter what some of the pundits say.

 

[NogginBoink]

One other thing: if you lose your job, you have x (60?) days to pay the full loan back. If you don't, it counts as an early withdrawal from the 401K and you pay the nasty penalties associated with that.

 

[CPA]

Originally posted by: NogginBoink
One other thing: if you lose your job, you have x (60?) days to pay the full loan back. If you don't, it counts as an early withdrawal from the 401K and you pay the nasty penalties associated with that.

Or you lose your job, have a credit card bill that you can't pay and your credit history is screwed for 7 years.

Look people, there are times when it is absolutely more advantageous to take out a 401k loan. Factoring whether or not you will keep your job is secondary in the decision process.

 

[Homerboy]

hehe well thatnks for all the input everyone, but as I stated earlier its not in a 401k with my employer. I wasn't thinking. It now sits in a IRA which you can NOT loan against.

And it CERTAINLY makes sense to take a loan out if you are pay higher rates on CCs or something else and you are CONFIDENT that you will pay back every penny on-time and not default. While you shouldn't do it to go buy some new car or fancy doohickey, your 401k can CERTAINLY be a valuable asset for you in times of need.

 

[labgeek]

Originally posted by: NogginBoink
One other thing: if you lose your job, you have x (60?) days to pay the full loan back. If you don't, it counts as an early withdrawal from the 401K and you pay the nasty penalties associated with that.

That's also program dependent. I'm no longer with my previous employer, while I can't add to the plan there, I can still take a loan out against it. Naturally, I can't do payroll deductions to pay it back, but they'd be happy to mail me a statement quarterly. I recently looked at it...