The Motley Fool Discussion Boards

Previous Page

Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: The downside of 401k loans... Date:  2/18/2015  8:41 PM
Author:  rhines81 Number:  309037 of 312956

We do have enough liquid reserves to cover the tax hit if treated as a disbursement. Wouldn't be happy about it, but we could do it if needed.

We could take money from another 401k to repay the loan. Avoids tax consequence, but the repayment terms would be shorter, meaning a higher monthly payment. This would probably force a reduction in 401k contributions while in repayment. Which I guess technically leads to some additional tax paid, but at our marginal rate, rather than a penalty rate.

OK - take your liquid reserves, pay back whatever you can and then take the loan from the other 401K to pay the balance.

I am not sure what "change" you are going through that requires paying back the original loan, but if it means you get the opportunity to roll over the 401K into a new one, then after you do that - take out another loan to pay back the funds used to pay back the original loan. Sounds temporary to me, but I could be wrong.

Just a side note: About 18 months ago, I took a 401k loan with payments that I could easily afford and immediately invested the entire amount. The investing (mostly doing swing trading) is now worth 4x the original loan amount and the current loan balance is now paid down by around 1/3. My strategy was to keep my 401k secured PLUS use it to generate money. It worked out extremely well for me. I can pay off the loan at any time and probably will in the next few months (but I think I will also turn around and take more money out after that).
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us