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Subject:  Re: The downside of 401k loans... Date:  2/10/2015  7:57 PM
Author:  vkg Number:  309021 of 312970

Some 401K plans allow repaying of loans on the existing terms after separation from your employer. Have you verified that you will need to pay the loan back immediately?

with 10% penalty

Federal tax penalty, your state may add additional penalties

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.

Since you already have a 401K loan, this isn't a bad option but maybe not the best. This essentially defers a decision while avoiding tax penalties. If you just purchased a house in the last year, a HEL may not be easy to obtain.

We don't have enough liquid reserves to comfortably repay the entire loan. If we did, we wouldn't have taken the loan (obviously).

With so little liquid assets outside of a 401K, keeping the cash for emergencies would be a good idea.
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