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Reply to "Would it make sense to go into 401k to pay down debt?"
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[quote=Anonymous][quote=Anonymous]Can you take a loan on your 401(k)? Then you can "go back" and put it back in while you repay it. I know the financial advisers all say not to do loans, either, but ....[/quote] Part of the reason that you are advised not to do this is that you will end up paying taxes twice on this money. You "borrow" money from your 401K, when you put it back in, you are replacing it with money that you've already paid taxes on at your current (likely higher than retirement) tax rate. Then when you retire and you take money out again, you will be paying taxes again at your retirement rate. The point of 401K is to pay taxes once on the money at the lower post-retirement tax rate. If at all possible, you need to cut your expenses down and pay down your debt without accessing tax deferred money. Note that this does not apply to a Roth 401K and so there is one less argument against borrowing against a Roth 401K.[/quote]
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