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Minxie,

You wrote, I don't know how to explain this clearly but I'll try. If you withdraw $10K in pre-tax $$, you will need to earn $10K +15% to replace it with after-tax dollars. I may be wrong (and I hope someone more knowledgable will correct me), but it seems to me that you take a 15% loss on your money just by withdrawing it.

It's just your interest payments that come from after-tax dollars.

In the simplest example, you would borrow the $10K and put it in a money market account. Over time you would repay the 401(k) from money market; but you would have to pay taxes on the interest you earned. The principal balance would not be taxed since a loan is not income.

Now substitute your favorite investment for the term "money market" and include capital gains with earned interest and you'll see how it applies to any situation.

- Joel
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