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Reply to "Explain to me why it's a bad idea to borrow against your 401k?"
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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Another thing - the money you first put into the 401k is before-tax money. You have to re-pay the loan with after-tax money. That's a big hit, depending on your income tax rate. [/quote] A very good point. So for every 10,000 you loan yourself, you have to repay somewhere in the ballpark of $12,500. And that's before any interest charged. Not a good deal. [/quote] I don't really understand what you are trying to say. I don't have to pay income tax on the amount I borrow from my 401k, so why does it matter if the amounts in there were pre-tax or not, as long as I repay whatever I borrow. [/quote] You have to pay taxes when you take it out though. So, 1) your loan payment is taxed, then 2) when you totally withdraw your money, that same money is taxed again.[/quote]
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