I am thinking of taking a loan against my 401K.I have been throwing around some ideas. And I am having a tough time convincing myself that this is a bad idea.
I can withdraw a loan about 36k from my account. The current interest rate is at 2.75%. I believe it is fixed at that rate for the 5 year loan.
I do not need the money, but the 401k money is sitting in a goverment securities fund getting about 2% a year interest. I am not looking to move my 401k balance back into the equites until after the recession is over, and I am guessing that this will be another 3 years, with slow growth.
I can get a 4% CD for a year at Navy Federal, and I was thinking of parking the money into CD’s, or high interest rate savings accounts.
My thinking is that this economy is going nowhere anytime soon. Since I believe it will be about 5-7 years until another bubble is created, or another bull market. Then what is the point of having 1/2 of the balance in my 401 K just being sit idle for 5 years. Especially if I can get access to half, for a low rate, which is lower than what I am getting with a CD at my bank.
I also think interest rates will rise within the next 2 years, and therefore the CD rates will be higher and the loan would basically be a interest free loan, or possibly make money from it.
Also by having the Cash balance now, I am able to jump on a investment oppurtunity without having to look for financing.
The downside is of course that the market comes roaring back, and I missed the opportunity to get the gains.
I was lucky enough to ride this latest bubble market up, and moved all of the balance to the goverment securities Nov 2007. Therefore I did not lose 50%. So I guess I am looking at the 50% of my 401K as bubble money, and therefore I am looking to take a risk on my assumptions of what the future may hold.
If you park the 401k loan money in CD’s what money will you use to “pay back” the 401k? Most 401k loans require a monthly payment (with interest to yourself). Do you have the cash flow to cover the servicing of the 401k loan?
If you park the 401k loan money in CD’s what money will you use to “pay back” the 401k? Most 401k loans require a monthly payment (with interest to yourself). Do you have the cash flow to cover the servicing of the 401k loan?
If you park the 401k loan money in CD’s what money will you use to “pay back” the 401k? Most 401k loans require a monthly payment (with interest to yourself). Do you have the cash flow to cover the servicing of the 401k loan?
If you park the 401k loan money in CD’s what money will you use to “pay back” the 401k? Most 401k loans require a monthly payment (with interest to yourself). Do you have the cash flow to cover the servicing of the 401k loan?
If you park the 401k loan money in CD’s what money will you use to “pay back” the 401k? Most 401k loans require a monthly payment (with interest to yourself). Do you have the cash flow to cover the servicing of the 401k loan?
