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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: 401(k) loan Date: 3/28/2013 4:16 PM
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I know it's a bad thing, but, last year, in order to avoid other bad things that were even worse, I took out a 401(k) loan. It was for the max: $50,000. Now, I'm paying that back at $900+ a month. The payments are scheduled over a five-year period, by which time Ill be a few months away from my planned retirement.

The thing is, I have to make the payments with after-tax money. But when I do retire (which will be either according to my plan, or perhaps a couple of years later), I'll be taking money out of the 401(k) and having to pay tax on it. The closer I get to retirement (and the end of paying off this loan), the worse it seems to me tax-wise.

In the worst case, if I retire as planned, I'd be making the last few payments on the loan -- with money that I've already been taxed on --and soon afterwards retiring and taking money out of the 401(k) and having to pay tax on it again.

Somehow that doesn't seem right. Maybe I am missing something, or not thinking about it in the right way? (Or maybe this is just one of the things that make a 401k loan a bad thing?)

culcha
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