The thought occured to me....

[SuperjetMatt]

Whatever floats your boat.
I think your time and energy is better spent increasing your income and/or reducing your expenses.
Then pay it off.

How long could it possibly take to pay off $1,700? The interest rate implications are negligible for amounts that small.

 

[KMc]

It's important to remember that everybody on ATOT contributes the annual maximum to their 401k and then has several supplementary IRA, CD, MMA, etc. accounts that our additional savings go into, so I'm afraid we can't really appreciate your situation.

You are going to have a really hard time getting anybody to say that taking a loan on your 401k is a good idea, however, if you are really in a financial pinch and you've analyzed all the pros and cons, then why not. It's your money, do whatever you want with it. I've done the loan option myself and it worked out really well for me. It felt alot better paying the interest to myself than somebody else and I was at a point where I had already suspended my contributions.

 

[DisgruntledVirus]

Originally posted by: Fritzo
It can be costly- only do it if it's an emergency. When you take a loan, I think you have to drop out of the 401K program for 6 months, and with stocks at rock bottom prices, you're going to miss a lot of buying/growth potential.

That's the reason I haven't yet, is because it's not an emergency and I can buy a lot more than I could 2 years ago with no increase in purchase prices (company stock comes to mind from ~$50/share to ~$20/share now, and we are too big to fail :laugh.

 

[TallBill]

Sounds like a terrible idea.

 

[scorp00]

Get another CC @ 0% and transfer the balance and pay that off with normal pay. It's a great time to buy stocks, if you sell you could miss the rebound.

 

[Pliablemoose]

Now is the time to increase your 401K contributions. It's a fire sale if you have decades to build it up.

 

[JEDI]

Originally posted by: DisgruntledVirus
That with the economy down, if I take a loan from my 401k @3.25% interest and repay it while the economy is in the tank I come out ahead.

Yes I realize that hurts my stocks that I buy with that money, so I don't have it getting stock. Am I missing something, or would it make sense to pull money out to pay off a $125/mo loan and use that to put towards other debts? I don't want to take from my retirement, but paying off a loan and other debts is really appealing to me.

what % is the loan?

and you repay 401k at only 3.25%???

when i was working for a billion $ corp, repayment was at 10%, and i loved it.
during the 2000 market crash, take out 1/2 of 401k, put it in bank account earning interest, and repay at 10%.

all 10% 'interest' goes back into my 401k. so basically i was making 10% on my 401k when the market was nosediving.

in other words, go ahead and pay off that loan.

 

[Scarpozzi]

My recommendation is to leave it in there. I've known a few people to take out loans against their 401k. The truth is that you need as much money in there as you can possibly get unless you expect to die young...

I've actually had a few family members do what you're talking about to do home improvement and pay off cars, etc... They all ended up with a much smaller 401k (especially after the market dropped) and weren't able to recover after attempting to pay it back while the market kept dropping.

If you continue to contribute to a 401k, 403b, or other market-driven portfolio you're going to get more bang for your buck for every month you pay in. Right now, everyone contributing is getting more and more shares for the dollar. As long as things work out and the economy rebounds in the next 20-30 years, we'll likely have a good sum of money in our accounts. If you truly want to reduce your debt, get a second job temporarily and try to control your living expenses.

I'm trying to pay off my short-term debts like the rest of America right now. The best advice is to never pay off a debt with another debt. (That includes rolling your credit card debts into 0% cards and all that other stuff unless you have a guaranteed bankroll to come in and pay it off and borrowing against another account.)

 

[DisgruntledVirus]

Originally posted by: JEDI

Originally posted by: DisgruntledVirus
That with the economy down, if I take a loan from my 401k @3.25% interest and repay it while the economy is in the tank I come out ahead.

Yes I realize that hurts my stocks that I buy with that money, so I don't have it getting stock. Am I missing something, or would it make sense to pull money out to pay off a $125/mo loan and use that to put towards other debts? I don't want to take from my retirement, but paying off a loan and other debts is really appealing to me.

what % is the loan?

and you repay 401k at only 3.25%???

when i was working for a billion $ corp, repayment was at 10%, and i loved it.
during the 2000 market crash, take out 1/2 of 401k, put it in bank account earning interest, and repay at 10%.

all 10% 'interest' goes back into my 401k. so basically i was making 10% on my 401k when the market was nosediving.

in other words, go ahead and pay off that loan.

It adjusts based on the market. Currently we are sitting at 3.25%. When I was first hired in, 2.5 years ago we were at 8%.

The loan is a 7% loan.

 

[CPA]

Originally posted by: Fritzo
It can be costly- only do it if it's an emergency. When you take a loan, I think you have to drop out of the 401K program for 6 months, and with stocks at rock bottom prices, you're going to miss a lot of buying/growth potential.

Not generally true. If you make a hardship withdrawal, then you will have to drop out for at least 6 months, but not if you take out a loan.

 

[LS21]

Originally posted by: Pliablemoose
Now is the time to increase your 401K contributions. It's a fire sale if you have decades to build it up.

we're in a period of unprecedented debt and unprecedented debt accumulation. lets add another 1 trillion dollar to band-aid the economy!

 

[rasczak]

Originally posted by: KMc
It's important to remember that everybody on ATOT contributes the annual maximum to their 401k and then has several supplementary IRA, CD, MMA, etc. accounts that our additional savings go into, so I'm afraid we can't really appreciate your situation.

You are going to have a really hard time getting anybody to say that taking a loan on your 401k is a good idea, however, if you are really in a financial pinch and you've analyzed all the pros and cons, then why not. It's your money, do whatever you want with it. I've done the loan option myself and it worked out really well for me. It felt alot better paying the interest to myself than somebody else and I was at a point where I had already suspended my contributions.

I do? Jeez i didn't know that. I'm barely scraping by at the 6% for 100% matching my employer does. I don't even have enough to start a $1000.00 cd, and i've just started "trying" to put away $25.00 a month for an emergency saving fund. However, since you have already done that, I have a fund that you could put into that I believe is a great investment. Rasczak's hookers and blow fund. Make all checks payable to rasczak. (Cash preferred)

 

[dullard]

1) It is only $1700. At 7% interest, that is under $10 a month of interest. I really don't see any reason to screw with your 401k for $10/month. If you are really hurting that bad, sell your plasma one time and you'll be good for the next half year.

2) Theoretically borrowing from your 401k can be win/win in a very narrow range of situations. But there are a ton of complications. You might just waste it. The stock market may rise and you miss out. You might not be able to repay it, etc. Think of all those fools who got big loans on their 401k so they can buy that McMansion that is now being foreclosed. They've ruined themselves short term (house they can't afford) and long term (no more retirement). Sure, that is an extreme case, but the risks can be huge for the minor ($10/month in your case) gain.

3) A bad economy is the WORST time to get a 401k loan. Suppose you do get the loan then spent it/pay off your debts. Then suppose due to the economy you are fired. The loan is due immediately upon leaving your job. Now how do you pay for this loan? You have no money, no job, you just used your 401k collateral up, and with no job you can't borrow again. If you don't pay it back immediately, then you are hit with income tax + penalty right when you have no money and no job. The consequences are quite bleak.

 

[KMc]

Originally posted by: rasczak

Originally posted by: KMc
It's important to remember that everybody on ATOT contributes the annual maximum to their 401k and then has several supplementary IRA, CD, MMA, etc. accounts that our additional savings go into, so I'm afraid we can't really appreciate your situation.

You are going to have a really hard time getting anybody to say that taking a loan on your 401k is a good idea, however, if you are really in a financial pinch and you've analyzed all the pros and cons, then why not. It's your money, do whatever you want with it. I've done the loan option myself and it worked out really well for me. It felt alot better paying the interest to myself than somebody else and I was at a point where I had already suspended my contributions.

I do? Jeez i didn't know that. I'm barely scraping by at the 6% for 100% matching my employer does. I don't even have enough to start a $1000.00 cd, and i've just started "trying" to put away $25.00 a month for an emergency saving fund. However, since you have already done that, I have a fund that you could put into that I believe is a great investment. Rasczak's hookers and blow fund. Make all checks payable to rasczak. (Cash preferred)

I'm the best man at a wedding in two weeks and the bachelor party is this Saturday, so I will be making a hefty contribution to your fund this weekend.

 

[DaWhim]

look like that's the most stupid thing you can do. dont forget about the tax consequences

 

[DisgruntledVirus]

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

There are no tax consequences for taking a loan against your 401k

 

[alkemyst]

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

only tax consequences if he doesn't pay it back.

 

[speg]

$1700 is nothing... I am more worried by "it's easier to spend that money in other ways." What does this mean? If you stockpile cash to payoff things, you will be tempted to spend it on hookers and blow?

 

[CPA]

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

THERE ARE NO TAX CONSEQUENCES WITH TAKING A OUT A 401K LOAN! YOU GUYS ARE DRIVING ME BANANAS..............

 

[DisgruntledVirus]

Originally posted by: speg
$1700 is nothing... I am more worried by "it's easier to spend that money in other ways." What does this mean? If you stockpile cash to payoff things, you will be tempted to spend it on hookers and blow?

It's more that it's just easier for me to pay it directly without me getting my hands on it, then it is assuming I won't spend money elsewhere (which I try not to do, but sometimes just don't care lol)

 

[BoberFett]

Originally posted by: CPA

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

THERE ARE NO TAX CONSEQUENCES WITH TAKING A OUT A 401K LOAN! YOU GUYS ARE DRIVING ME BANANAS..............

I think a lot of people don't know you can borrow from yourself through your 401k.

Still, it's $1700. Just pay it off.

 

[rasczak]

Originally posted by: CPA

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

THERE ARE NO TAX CONSEQUENCES WITH TAKING A OUT A 401K LOAN! YOU GUYS ARE DRIVING ME BANANAS..............

psst.. CPA..there are tax consequences to taking out a 401k loan right?

 

[DisgruntledVirus]

Originally posted by: rasczak

Originally posted by: CPA

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

THERE ARE NO TAX CONSEQUENCES WITH TAKING A OUT A 401K LOAN! YOU GUYS ARE DRIVING ME BANANAS..............

psst.. CPA..there are tax consequences to taking out a 401k loan right?

An early withdrawl yes, a loan no.

The loan is different. Basically your 401k is acting as the bank, which you take the loan out, and repay the loan+interest. The difference being you pay interest to yourself. There are other consequences to your 401k until you repay it, but that is basically what taking a loan out against my 401k is.

 

[alkemyst]

the only penalty you'd ever face for making a loan from a 401k is if you fail to pay it back properly. There is a lot of misconceptions.

 

[CPA]

Originally posted by: rasczak

Originally posted by: CPA

Originally posted by: DaWhim
look like that's the most stupid thing you can do. dont forget about the tax consequences

THERE ARE NO TAX CONSEQUENCES WITH TAKING A OUT A 401K LOAN! YOU GUYS ARE DRIVING ME BANANAS..............

psst.. CPA..there are tax consequences to taking out a 401k loan right?

I stab you! aaaaaaaggghhhhhhhhhhhhhhhhhhhh