I just finished reading an article about the detriments of a loan and had to find a medium through which to respond. I first became a 401k participant when I was 25 and with so much time before retirement, the only thing I was interested in was the opportunity for forced savings (of course, getting fifty cents on every dollar for the first six percent of my salary helped my decision, too). There are drawbacks. If you lose your job and can't repay the loan, there are a lot of penalties. However, one of the biggest arguments against a loan that I read is the fact that you lose earnings. Last year I changed jobs and the first thing I did was get a bridge loan from a bank to cover the funds while I rolled over my plan. Once transferred, I immediately took out another loan for a much larger amount. The way I look at it, my loan represents the portion of my savings that is fixed. I am earning a flat 8% on that money. Now, what about the rest of my money? This year the only thing that saved my plan was the fact that I had a large portion invested in the fixed asset called 401k loan. I believe loans in moderation are a good thing. I live in my own home because of my 401k loan. Thanks for listening.
thequeenfool:I live in my own home because of my 401k loan.Paying 8% to yourself in your 401K and paying 8% on your mortgage. Paying off two loans and eliminating any possiblity of growth on the 401K loan amount. Sounds like a heck of an investment to me. You may want to consult a financial advisor.Good luck.
Paying 8% to yourself in your 401K and paying 8% on your mortgage. Paying off two loans and eliminating any possiblity of growth on the 401K loan amount.It looks to me like he is getting 8% growth on the 401(k) loan, unlike the 30% loss an index investment achieved the past 12 months.I am not advocating 401(k) loans, but in this case the "eliminating any possibility of growth" is growing 8%!
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