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I said: The biggest danger with a 401(k) loan is the possibility of defaulting on the loan and having to pay the taxes and penalty on the withdrawal.

Rayvt said: No, actually the biggest danger isn't defaulting. The biggest danger is getting called to an impromptu department meeting in the cafeteria, where the boss reads from a piece of paper that is being read to all the other departments at the exact same time. The paper that starts out with, "Unfortunately, due to business conditions .... you are all laid off."

That's when you have 30 days to completely pay back the entire 401k loan balance.

Yes, that is one of the reasons that you could default. Generally, the other reason would be that you voluntarily left your job and didn't pay the money back within 30-60-90 days (or whatever your plan required).

So, while being laid off is one possible cause of default, it's not the only possible cause. That's why the biggest danger for a 401(k) loan is defaulting, not being laid off. And that's why the next sentence in my post said: So having a contingency plan that provides for that is critical.

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