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Financial Planning / Foolish 401(k)s


Subject:  Re: 401K loan for Roth Date:  11/14/2011  12:56 PM
Author:  pauleckler Number:  24775 of 26170

That is a reasonable strategy assuming you can earn better returns in your Roth IRA.

Keep in mind that 401K loans are callable. Usually that happens if you change jobs or sometimes if the employer changes the 401K custodian. If the loan is called and your Roth investments are down in value, you could have to repay the loan from other sources or it will be treated as a distribution and assessed penalties in addition to income taxes.

The idea is more attractive if you know your job is secure, but you might need to be conservative with your Roth investments at least until you have gains beyond the loan amount.
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