[quote=carlsbadworker][quote=asianautica]I could be wrong, but I think the $ you borrow will be taxed twice. You’re paying back with after tax $. When you withdraw later, it’ll be taxed again. So, unless I’m wrong or you’re in the 0% tax bracket, it doesn’t make sense to borrow from your 401k to refi. Also, if you quit or get fired, you need to pay that money back immediately. The $ in your 401k is protected from bankruptcy. They can’t go after that $. However, they can go after your house if you filed for bankruptcy.[/quote]
I think that’s absolutely correct. One extra angle of consideration is that you don’t want to put all your eggs in a single basket. So unless you have a huge 401K saving, you don’t want to take it out and put it into a house altogether. After all, house is a depreciating asset right now and stock market could turn around at any time.[/quote]
WRONG WRONG WRONG. Let’s debunk this Suze Orman crap:
Yes, you are paying taxed money into your 401lk that will be taxed again upon distribution. But you just took out a loan of the same amount of untaxed money that’s now in your hand!
NET result is you are not paying any double taxes on the money borrowed from your 401k.
The only money that is double taxed is the extra amount of post tax money you are additionally paying back as interest to yourself. That extra amount of interest is paid back into your 401k to compound tax free until distribution.
You end up paying only a proportionally small amount extra in taxes but this is offset by the cash in hand provided immediately from the loan and at the end of payback, you will end up with more total contributed into your 401k.
Pretty cheap source of funds in all. Just make sure if you take a 401k loan, you can pay it back into the 401k or you will be taxed with penalties for early distribution.
