Comments on: Borrowing from the 401K: The Best of a Bad Situation http://ptmoney.com/borrowing-from-the-401k-the-best-of-a-bad-situation/ Real Personal Finance for a Life Without Limits! Mon, 13 Feb 2012 04:10:07 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jared Grubbhttp://ptmoney.com/borrowing-from-the-401k-the-best-of-a-bad-situation/comment-page-1/#comment-3460 Jared Grubb Thu, 01 Jan 1970 00:00:00 +0000 http://ptmoney.com/?p=2579#comment-3460 I am always a little annoyed that "repaid using after-tax money" is listed as a downside to 401k loans, as though this is something unique to this kind of loan.If you're trying to pay for X, then no matter what kind of loan you take (401k, bank, family, etc), you're going to repay the loan using after-tax dollars... Even if you dont take a loan and you pay for X using your savings, that money is after-tax dollars and will be replenished with after-tax dollars.The only reason we need to remind people that the loan is "repaid with after-tax dollars" is to dispel the notion that somehow you get to short-circuit the tax system by paying for something using pre-tax 401k dollars and ALSO get to replenish it using pre-tax salary dollars... The IRS certainly would never let that happen :) I am always a little annoyed that “repaid using after-tax money” is listed as a downside to 401k loans, as though this is something unique to this kind of loan.

If you’re trying to pay for X, then no matter what kind of loan you take (401k, bank, family, etc), you’re going to repay the loan using after-tax dollars… Even if you dont take a loan and you pay for X using your savings, that money is after-tax dollars and will be replenished with after-tax dollars.

The only reason we need to remind people that the loan is “repaid with after-tax dollars” is to dispel the notion that somehow you get to short-circuit the tax system by paying for something using pre-tax 401k dollars and ALSO get to replenish it using pre-tax salary dollars… The IRS certainly would never let that happen :)

]]> By: Mirandahttp://ptmoney.com/borrowing-from-the-401k-the-best-of-a-bad-situation/comment-page-1/#comment-3458 Miranda Thu, 01 Jan 1970 00:00:00 +0000 http://ptmoney.com/?p=2579#comment-3458 Thanks for sharing this story! While it may not be the best thing to borrow from a 401k, it sure beats borrowing from someone else. I think the key is to use it as a last resort in an emergency and pay it back quickly. Thanks for sharing this story! While it may not be the best thing to borrow from a 401k, it sure beats borrowing from someone else. I think the key is to use it as a last resort in an emergency and pay it back quickly.

]]> By: PThttp://ptmoney.com/borrowing-from-the-401k-the-best-of-a-bad-situation/comment-page-1/#comment-3457 PT Thu, 01 Jan 1970 00:00:00 +0000 http://ptmoney.com/?p=2579#comment-3457 Link is correct now. Thanks for the comments. Link is correct now. Thanks for the comments.

]]> By: Cheapskate Sandyhttp://ptmoney.com/borrowing-from-the-401k-the-best-of-a-bad-situation/comment-page-1/#comment-3456 Cheapskate Sandy Thu, 01 Jan 1970 00:00:00 +0000 http://ptmoney.com/?p=2579#comment-3456 PT,Thanks so much for featuring my comment! I was really in a dire situation and there was 30K sitting there in the 401K. I had been participating in a 401K of some kind since I was 18 so I recognized the benefits of a 401K pretty early. I was making very little since I was still in school but I still managed to contribute at least 3% of my paycheck. None of the companies that I worked for did any kind of matching so it was all my money and 100% vested.The only problem that I have now is that I want to make extra (snowflake) payments above what they are taking from my paycheck but Fidelity doesn't allow you to do that. It was to be a 100% payoff check or just the regular deduction from your paycheck. Anyway, thanks so much! PT,

Thanks so much for featuring my comment! I was really in a dire situation and there was 30K sitting there in the 401K. I had been participating in a 401K of some kind since I was 18 so I recognized the benefits of a 401K pretty early. I was making very little since I was still in school but I still managed to contribute at least 3% of my paycheck. None of the companies that I worked for did any kind of matching so it was all my money and 100% vested.

The only problem that I have now is that I want to make extra (snowflake) payments above what they are taking from my paycheck but Fidelity doesn’t allow you to do that. It was to be a 100% payoff check or just the regular deduction from your paycheck. Anyway, thanks so much!

]]> By: the weakonomisthttp://ptmoney.com/borrowing-from-the-401k-the-best-of-a-bad-situation/comment-page-1/#comment-3453 the weakonomist Thu, 01 Jan 1970 00:00:00 +0000 http://ptmoney.com/?p=2579#comment-3453 That is certainly a best case scenario for borrowing money. Unfortunately most people who do borrow won't be so lucky. They'll either run out of money again, waste the borrowed funds, or simply be too lazy to make the effort to pay off the loan in a reasonable amount of time.I wish you could not borrow from the 401(k). Either make it so they can cash it out and pay the fees or so you can't withdraw with intent to repay.PS, as of early this morning the link to the commentor's website does not work. That is certainly a best case scenario for borrowing money. Unfortunately most people who do borrow won’t be so lucky. They’ll either run out of money again, waste the borrowed funds, or simply be too lazy to make the effort to pay off the loan in a reasonable amount of time.

I wish you could not borrow from the 401(k). Either make it so they can cash it out and pay the fees or so you can’t withdraw with intent to repay.

PS, as of early this morning the link to the commentor’s website does not work.

]]>