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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: Thinking Of Borrowing??? Date:  10/30/2013  5:46 PM
Author:  MetroChick Number:  307443 of 312188

Net/net, there is no difference in the income taxes the OP would pay this year whether or not they take out the 401(k) loan. No increase in taxes paid => no double taxation

I'm not talking about an increase in income tax due to taking money out of a 401K.

The money in my 401K right now is all pre-tax dollars. If I wait until I'm 59 to start taking money out of it, I will pay tax on what I withdraw.

If I take a loan out on it today - I have to pay back the loan with dollars that I've already paid taxes on - so then my 401K becomes a mix of some money that's pre-tax, and some that was to pay back a loan and is therefore post-tax. And then come 59 when I withdraw I get to pay taxes again on those post-tax dollars in my 401K.
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