and taking your money out of the market has potentially huge risk, because nobody knows what the market is going to do.I realize you pay it back with interest but you lost growth on it.
Dave, sorry if I missed it, but out of curiosity, what's your interest rate for a 401k loan? I've been with my employer's Fidelity account for ~27yrs. It's something crazy now like 9.9% for a max of 60 months with my Fidelity now. In the past I took loans for major home improvement projects. This was back when I could borrow from my 401k for ~2.9%. and the payment came out of my weekly paycheck. Fidelity will map how a loan can effect your long term earnings. The loans I took in the past certainly did not financially ruin me. Obviously it's not the best financial choice to borrow from your 401k, but everyone's circumstances is different.I need other opinions on this. I want to know if this is a good idea or not. I have a balance of 62,452 on a Heloc loan, at an APR of 8.5% monthly, so roughly 425 a month, interest only payment. I can get a loan out on my 401K for 46,000. The twice-monthly payments,or per check payment, will be 483.54 exactly, for 5 years for 401k loan. I plan to make more payments. Here's my question, is it better to pay off the majority of the HELOC with 401K and save hundreds in interest and I pay myself back, or just leave as is? I can take out and pay back the HELOC at will, just like a credit card.
This plus as I stated, he might get away with it for 6 months (or whatever short term), but NO ONE looks like a genius being out of the market for 2-3-4 years............and taking your money out of the market has potentially huge risk, because nobody knows what the market is going to do.
Mine's the same, only with Vanguard. 9% ,60 months to pay. I can take out or put in at any time.Dave, sorry if I missed it, but out of curiosity, what's your interest rate for a 401k loan? I've been with my employer's Fidelity account for ~27yrs. It's something crazy now like 9.9% for a max of 60 months with my Fidelity now. In the past I took loans for major home improvement projects. This was back when I could borrow from my 401k for ~2.9%. and the payment came out of my weekly paycheck. Fidelity will map how a loan can effect your long term earnings. The loans I took in the past certainly did not financially ruin me. Obviously it's not the best financial choice to borrow from your 401k, but everyone's circumstances is different.
I couldn't pull out what I needed back then, plus the HELOC was 2.0% for 6 months when I got itI'm confused why not take the 401k loan to begin with instead of taking the HELOC?
If you're having positive cash flow vs the cost of the HELOC, pay it off ASAP and save on the interest. You'll thank yourself in 9 years when you're ready to retire.
I'm surprised how anti-401k loan the responses are...
You are missing that while yes, you putting more back into the 401k than you took out b/c of the interest you pay back on it, that money is no longer working for you earning investment income which over a long period will dwarf the little bit of HELOC interest you are paying.Interest rate on the HELOC matters as you are paying someone else. Interest rate on the 401k loan doesn't, as you are paying yourself.
We are an anti loan bunch in generalReally? With our group of BITOG masterminds?
I'm not anti-loan or anti-interest at all BTW, I just can't believe how many people would borrow against their retirement and lose that future value/investment growth - folks really should do the math and make sure they understand the lost value of doing this...maybe for some it's not huge/isn't as much as the interest paid out. I'd rather take out a loan for home improvements, cars, etc. all through a regular loan than ever borrow against all I have to retire and again, I have no issues with loans at all, it's a part of life for most of us that aren't independently wealthy/isn't some horrible thing, just have to understand the math.Tradeoff between lost potential growth while you are out of "the investment" in 401k versus current "known" rate of the HELOC that I am assuming floats based on interest rates.
I'm surprised how anti-401k loan the responses are although I do agree re the risk of losing/changing job and the immediate payback potential.
I'm not anti-loan or anti-interest at all BTW, I just can't believe how many people would borrow against their retirement and lose that future value/investment growth - folks really should do the math and make sure they understand the lost value of doing this...maybe for some it's not huge/isn't as much as the interest paid out. I'd rather take out a loan for home improvements, cars, etc. all through a regular loan than ever borrow against all I have to retire and again, I have no issues with loans at all, it's a part of life for most of us that aren't independently wealthy/isn't some horrible thing, just have to understand the math.
I kid about the BITOG group, but in general, if you want reasonable information for just about anything, your chances of getting it here is pretty darn good with the group we have.We are an anti loan bunch in general
it's a loan. I don't pay taxes on when I take it out, plus, I pay myself interest.