Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Most people are repaying their 401k loan in lieu of current year contributions, so it's still likely a net -50k gap in the account.

Bad assumption is bad.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Most people are repaying their 401k loan in lieu of current year contributions, so it's still likely a net -50k gap in the account.

why do you assume they are no longer contributing? I'm confused.

Because if they had all this money to contribute their normal yearly amount AND pay off a huge 401k loan, they would have had the means to save for a real down payment in the first place. But they didn't...

I guess. However, my retirement contribution comes out of my paycheck before I see it--- and I never consider it as part of my budget. So I guess I assume I would not touch contributions even if I took a loan from my account.

Additionally, in my case I would be taking the loan to make a down payment in order to buy before selling my current place. Therefore when I do sell the current place, the equity can repay the loan immediately. Its just a way that I can buy without having a contingent offer.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Most people are repaying their 401k loan in lieu of current year contributions, so it's still likely a net -50k gap in the account.

why do you assume they are no longer contributing? I'm confused.

Because if they had all this money to contribute their normal yearly amount AND pay off a huge 401k loan, they would have had the means to save for a real down payment in the first place. But they didn't...

I guess. However, my retirement contribution comes out of my paycheck before I see it--- and I never consider it as part of my budget. So I guess I assume I would not touch contributions even if I took a loan from my account.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Most people are repaying their 401k loan in lieu of current year contributions, so it's still likely a net -50k gap in the account.

why do you assume they are no longer contributing? I'm confused.

Because if they had all this money to contribute their normal yearly amount AND pay off a huge 401k loan, they would have had the means to save for a real down payment in the first place. But they didn't...

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Most people are repaying their 401k loan in lieu of current year contributions, so it's still likely a net -50k gap in the account.

why do you assume they are no longer contributing? I'm confused.

Anonymous wrote:

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Most people are repaying their 401k loan in lieu of current year contributions, so it's still likely a net -50k gap in the account.

Anonymous wrote:

Anonymous wrote:Don't you people understand continously compounded interest and what you lost? I think borrowing from a TSP is incredibly stupid

This concept is lost on them. Sure, would be a great idea if you could time the withdrawal to coincide when the real estate market is at bottom and stocks are on the decline. Over the last 10 years you would gain way more money on retirement investments than real estate investments.

However I dont think the kind of person that entertains a retirement loan is exactly financially literate.

Yeah, this is wrong. All money not in the market has an opportunity cost, including non-retirement money used for a down payment. The cost of (say) a $250K down payment is indeed the lost returns on that $250K. But this does not depend on whether the money came from a retirement account, a non-retirement account, or even cash.

Because 401k loans allow you to move money in and out of retirement accounts with zero transaction costs, they are no different as a source of funding than non-retirement money.

Anonymous wrote:Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

But that 50k is paid off in just a few years. It’s not taken out permanently.

Let's say you took 50k out for a down payment at 30.

50k compounded at 7% until age 65 is $533,829. That's the real cost of a 401k loan.

Anonymous wrote:

Anonymous wrote:Don't you people understand continously compounded interest and what you lost? I think borrowing from a TSP is incredibly stupid

Are you serious? I don't have a TSP but I did borrow from my 401K and paid it back with interest in two years. The interest went to me rather than a bank. So my 401k continued to grow and I got a very good rate with no hassle.

The idea is the amount you borrowed didn't grow, and that was the true cost of the loan.

Anonymous wrote:Don't you people understand continously compounded interest and what you lost? I think borrowing from a TSP is incredibly stupid

This concept is lost on them. Sure, would be a great idea if you could time the withdrawal to coincide when the real estate market is at bottom and stocks are on the decline. Over the last 10 years you would gain way more money on retirement investments than real estate investments.

However I dont think the kind of person that entertains a retirement loan is exactly financially literate.

Anonymous wrote:Don't you people understand continously compounded interest and what you lost? I think borrowing from a TSP is incredibly stupid

Are you serious? I don't have a TSP but I did borrow from my 401K and paid it back with interest in two years. The interest went to me rather than a bank. So my 401k continued to grow and I got a very good rate with no hassle.

Not TSP, but we used a 401K loan for the downpayment on our house nearly a decade ago. Aggressively paid it back, no regrets.

For us, it was the only way to afford a six-figure downpayment in this area, and we knew we were staying longer-term.

No regrets. Like PP, I re-adjusted my contributions so my repayment is like my G fund.

No regrets. Used the funds to buy a house at the bottom of the market which has nearly doubled in value. If I hadn't done it, I'd still be paying rent.