Does it make sense to borrow money out of 401K to refinance?

[thebazman]

You pay yourself interest —

My 401(k) allows me to borrow up to half for a first-time home purchase. I would receive 5% interest when I pay back the loan to my account.

So check what the interest rate is on the loan. The only drawback is that the amount you take out will reduce your overall 401 (k) balance, lessening the effect of compound interest toward your future retirement goals. Probably not an issue as long as returns are as abysmal as right now!

[an]

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.

[an]

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.

[an]

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.

[an]

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.

[an]

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.

[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.

[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.

[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.

[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.

[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.

[Coronita]

There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration. I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.

[Coronita]

There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration. I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.

[Coronita]

There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration. I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.

[Coronita]

There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration. I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.

[Author]

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