3 times its ok to take a loan from a 401k | Retirement planning
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- Опубліковано 17 кві 2017
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I borrowed from my 401k account for a down payment on a triplex, I pay myself back @7% and earn a return of 15+% on investment .
I'm thinking of doing this currently!!!
Looking to do the same. Cash on cash return of 20+% for an accessory dwelling unit.
How
Don’t you pay tax penalties?
@lopezara1107 no you don't because it's a loan not a withdrawal you still have to pay it back when you take a loan especially if you quit your job or get fired
Had to......no choice. I'm glad it's there.
We have to live today. I might be dead before I can take it.
Hopefully you made it through and you are back at saving again!
Hometown Girl that’s true so many friends haven’t lived to see 23
MakeUFumble
You guys must live in a war zone.
Could NOT agree more with reason #3! Very, very glad to hear you say this sir. Can't tell you how many people have been mislead by being told to NEVER EVER! borrow against your 401k. Good stuff sir!
Josh S thanks for the nice words and thanks for watching!
In the year 2000, I used a 401K loan to make a down payment on a home. When the markets crashed a year later that money wasn't affected. There were also a lot of unexpected costs involved when I bought the property so it was the best choice at that time for me. I was advised not to do the loan, although I would still be living in an apartment if I had followed that advice.
flilguy they want you to pay them the interest lol good job but
@@dieseldawg7132 Yes you are paying the interest although if the investment is losing money it's a better choice.
@@flilguy i agree
And your house is worth more I bet
@@dieseldawg7132 interest on 401k loan is just money going back into your 401k. The interest rate is irrelevant it’s not lost money.
I took a couple of loans from my 401k, first to put a down payment on my home. My home has doubled in value since 2017, currently worth 650k. Second time I took a loan was when I had to pay off some debt to improve my credit score and refinance my home loan after divorce. I refinanced during the lows in 2021 and also got rid of my PMI. I probably won't take another loan again if I can help it!
You should also mention that 401k loan interest is paid back TO YOURSELF. All of the payment goes back into your 401k. So the interest is a non factor really
Is this true
@@wfgdaniel yup
@@wfgdaniel this is half true. They aren’t accounting for the potential compound interest they could have gained on that money if they never took it out.
@@scaryfingers101 Thats why only borrow in a dowturn or market crash, you dont risk losing out on any "gains", also that money you took out is shielded from any "losses" you froze your money in time essentially
@@wfgdaniel yes
One thing people never bring up is the fact it doesnt affect your credit score. For example I'm trying to buy a home but have credit card debt so my score isnt perfect. Borrowing from my 401k pays off those high interest debts and raises my score.
Jory Lafountain
I didn’t need a credit score to buy my home and got pre-approved for $150k and bought a $70k condo paying it off in 9 years.
Maybe that’s why.
It’s more financially efficient to loan against permanent cash value life insurance because you continue to have uninterrupted compounded growth on your cash value since the loan is coming from the insurance company not your cash value.
Thank you brother!! this is 100% all about my question. I got the exact answer from you!!!!!!!!
Thanks, do well to write us on steps for your perfect retirement plan ☝️
It's also good to note that if you leave your job while having an outstanding 401k loan balance and don't pay it off in the 60-90 days, the remaining balance will be considered as a withdrawal and you'll be charged the penalty for withdrawing before 59 and get taxed on it as well.
There are other options on that typically. Consult your plan on that.
I took a 50K loan one time to put down on a new property while our other property was still on the market! Paid it back within 3 months!
Thanks for the great videos...very interesting...
I will be retiring in 4years and i don't think i have enough to retire. Been looking out on how to invest some of my savings. Anyone to help out?
I've been unsure about the market due to it's volatility, at the same time I still feel it's the right time to make profit cos of the price increase, heard someone speaking of making over $700k during this quick rise and I'm driven to ask what techniques/skillset is needed to achieve this.
Can you recommend any ? Been looking out for one.
Should have saved up in your 20 years
Look at expating. I am start preparing now. If italian decent look into dual citizenship. If not watch videos on Vietnam Thailand and southern Italy.
Another one is find land that your allowed to live on permanently with a 5th wheel aluminum frame. The south usually has land like this. I live in a place where you have internet cesspool and cityh20. I own land. I pay hoa but we have rivers pools parks etc. My hole place cost 36k . I like it better than my home in another state. Some of these places allow you to biuld enclosed decks etc
No body need to get to that point.
That is why it is very important to save about 6 months for emergencies.
Agreed! UNLESS! YOUR 6 months goes away from an emergency vet bill and then a week later your car breaks down and you have no other way to get your family a vehicle and get back and forth to work
That's where we're at sadly and I'm an avid Dave Ramsey follower but at a cross road
The interest if you take the loan is paid back to you since you're borrowing from yourself, something to also keep in mind .
So it’s like a bond to ourself?
The other side of loans from the 401k your borrowing pre-taxed money and paying it back with post taxed money and it then is again considered pre-tax money when you withdraw it later and pay taxes on it again.
Thank you for saving me. Thank you for sharing 😊
This was the most informative commercial I may have ever seen.
You may have hit on this and I missed it but generally, the interest paid on a loan you take, is interest you pay to yourself. I guess this is to offset opportunity cost of taking the money out and not earning the return while you pay it back.
So easy to understand doesn't sound like double talk
Video starts at 2:11
CHACE
No big deal.
I don't have short attention span issues.
To the people saying it’s bad cus your gonna end up paying double taxes on it, if your using this loan to pay off for example a car payment in full. You’d still end up saving all that money on the interest in the car payments which year over year is more costly than the double taxes. Or am I missing a step ?
I took money out for the first time ever this past week,, had too as medical needs and mortgage payments came up.. Sold a bunch of personal stuff on ebay to help with expenses but that didn't cut it. Really sucks you have to take a loan out on your own money, but I guess that is how those companies make a profit.
Well the good news is you will pay yourself back with the interest going to you and not the company. Hope your health improves!
Might yolo on a car that I couldn’t afford otherwise thanks to my IRA it’s an older car a the value grows on that car 8% per year so to me that makes it not a bad investment and technically not a loss
Nice video but I was wondering y u were 😂😂 You have a missing finger when u said 3..nice humor 😂💯
Ive watched a couple of your videos. But for some reason I didnt actually think to hit the LIKE button until you played the jazz. :-). Keep up the good work.
Informative video. Thank you😊👍
Thanks for watching!!!
I have always been taught to never borrow from my 401k. This is something I take extremely seriously. I save for rainy days by sacrificing and building up my liquid accounts...savings, checking etc.
shaylas78 then you have been taught well :) thanks for watching!
I don’t understand 401k if people save and have a mortgage or credit cards debt
so what?
Remember that if the stocks are doing great then, your money will grow but, if the economy goes bad then is more than likely that you will lose half. I've lost half of my 401k during the 2008 crash.
@@Jazzwealth so if i have the money in my savings account i should use that instead of 401k loan?
Hey Jazz. Help please can they take the already accumulated money on the invoice they send every three months ?? No?? Right? 🤷🏾♀️🙋🏾♀️
My wife has 401k and she owns 4k and wants to pay it off and get other loan should she do it or wait after this crisis with the coronavirus
I had always heard that I had to pay back the loan in 60 days if I left my company but I got laid off in January with about 75% still outstanding on a 10K loan. The 401K administrator for my old company said I just had to keep paying every month and I could pay along the originally agreed timeline.
Can I do a hardship without taking a 401k loan first?
Borrow money from your 401K to contribute to a downpayment on an investment property = always great idea. Just make sure the cashflow covers your 401k payment
Awesome this is what im thinking about doing. Was the house I originally moved into, got a job promotion and house is rented out. I owe 79K thinking of taking about 40k from savings and the rest from 401K. Would be able to pay the 401k back in 7 months max..
@@pierre598 How did it all go sir?
Can you tell me the benefits to rolling over a 401 to IRA?
Great video, thanks! Question: can I take a straight withdrawal out to pay for credit card debt? Or does credit card debt not fall under hardship? Or is there a difference between hardship and normal withdrawal? Thanks a lot!
Whoa Brian just simply pay off your credit card debt little by little and leave your 401K alone.
I’m about to pull half 7.5k from my 401k to pay back all my debt except for my car , I have 15k debt and figure it’s better to pay credit cards and loans I pulled when I had my apartment and it’s gonna be be only 60 a week for 24 months which is nothing I’m not leaving any time soon and want to make sure I’m basically debt free when I go to buy a house
Does the loan check come sooner than 7-10 days?
Can I buy individual stocks like Apple, or MSFT and channel that into my pre-existing company Walmart 401K?
dear J W M, is there the way my loan can reduce from my money within the account, and not from my paycheck? i do have way more money than the loan i am taking out. appreciate your time to reply. have a great day
What if I had already left my job but haven't transferred my 401k to my new job. Would I have to owe the government money come tax season?
I changed jobs but can I still be able to take out loan from the pension from my previous employer? Is that possible?
With the market tanking is it smart to pull out a loan to have a smaller amount for losses? In last 2 weeks I am at 23% loss.
what if my 401k is from a divorce and its in his still being vested in his old employee plan?
How did you profit from. The team I need inquiry on this
Say if u borrowed the money and got laid off but picked up another job can u have that money taking out your paycheck to continue payments
I have taken 401k loans out 3 times to buy rental properties. I feel like I have gotten back a good return because the properties have doubled. My only problem is I spend my cash flow and don't reinvest it.
Once I noticed he only had 3 fingers on the right hand I got distracted
If the loan amount is within the low-risk, low-yield part of your 401K investment allocation, say the 20 of an 80/20 … then take the loan all day. If you want a new car and the bank’s at 7% interest and you’re gonna do it, then using the 401K loan instead is basically turning that low-yield part of your portfolio into a reasonable return and still low- to no-risk.
What's the difference between an ira and a 401 cons pros
401 loan 20k to pay off mortgage is ok?
When I took out a loan from my 401k it stated the loan would have to be repaid in full if you leave your job. All the financial advisors on UA-cam say the same thing. I had an accident I became disabled I could not keep my job. I received a letter stating that if I authorized direct Bank withdrawals I can continue to make my monthly payment. I did not have to pay it off in full within 60 days. I have always heardthat if you left your employment you would be required to repay it off in full. Apparently that is not true.
I still don't want to touch mine.
I've seen after 30 years what happens when coworkers borrowed from their 401k.
Nice of them to do that as it comes down to just making it easy to get the money back rather than putting you into a tax brainstorm.
@@blackworldtraveler3711what happened they missed a bad year in the market put more money in weekly than you and are now rich lol 😂 jk
I'm 29. What about if I want to buy a Harley Davidson Breakout 117?
Okay. GOnna go borrow $50,000 to buy boat and take a $6,000 vacation. Pay back in 4 years. J/K, not a good idea. Nice video.
I have a couple questions about this...
1: If its MY money that I'm loaning MYSELF... if something happens and I lose my job, why do I have 60 days to pay it back? What happens if I don't? Do I sue ME for breach of contract? Does it simply become taxable as if I cashed out a 401k at that point?
2: I know this video is 6 years old, but in today's market where everytime Biden opens his mouth my 401k value declines, my account isn't growing, I'm actually operating at a YTD loss... Why WOULDN'T I want to pull that money out and use it against something else. In my mind (correct me if I'm wrong) the less thats in there, the less they can lose me.
The cost of borrowing from one's 401k is not limited to the interest rate. Repayments often incur double taxation and opportunity costs on the market side. This means the real cost of a 6% loan taken out in January of last year for 12 months (assuming an S&P 500 investment and a 20% tax bracket for reference) is closer to 26% PLUS 30% or so of missed market gains. Real cost falls in right around DEVASTATING. To be fair, the usual real cost outside of 2018 is closer to 34%, but that still hurts.
Depends on how you use it. I take 6k out as a 401k loan every year to put into a Roth ira in January. My Roth IRA gets better returns than my 401k and has less fees. Plus, I'm able to a few extra hundred back into my 401k because of the interest. It's a win win situation. There is no double taxation because you were never taxed on your original contribution (if you has a loan from a bank you wouldn't expect to pay it back with pre-tax money, would you?). The only thing that you may consider double taxed is the interest - but you weren't supposed to be able to contribute that extra amount anyway.
@@dec1slh The word was "often", not "always". Sad truth is, a lot of 401k providers pay back those loans using after tax money, even if the funds borrowed were against roth contributions. In the case of a loan against traditional funds, you'll pay the tax before repaying the loan, then again at retirement. On the Roth side of the 401k, you'll already have paid taxes to put the money there, and will also pay taxes again to put it back. Obviously, this isn't how a 401k is supposed to be run, but it happens enough to be a real concern to plan for. If your company handles it right, awesome! I can see that working out beautifully, and you're lucky to not have had that issue. I was unlucky enough in my experience to have said problem twice.
@@rcarbonell07 they processed is regulated, so should be handled the same way across all providers. The misconception is that people think they are supposed to be able to make contributions tax-free, borrow tax-free, and pay back tax-free. It's not realistic to think that, because it would result in getting a tax break twice and everyone would do it because you would be getting something for nothing. ALL loans, no matter where you get them are paid back with after-tax money, you are not taxed on the loan. You are borrowing funds that and paying back what you borrowed - I don't see why people think that they should be awarded (with an additional tax break) for borrowing money. Again, the only double tax is on the interest and you can consider that the cost of doing business for being able to access the funds without going through a bank, credit check, etc.
@@dec1slh They are regulated, but mistakes happen. I used to process 401k transactions. Trust me, that labor pool is far from perfect. As for paying back a loan with after tax money, you shouldn't have to pay taxes on money you borrow from yourself and pay back to yourself, because the taxes associated with that money are already accounted for. That would be like taking money out of an ATM, and being taxed to walk into the bank lobby to redeposit that same cash. Transactions on your own money should be tax neutral.
@@rcarbonell07 so you think that you should get a tax break twice for borrowing from yourself, got it. You are replenishing (making whole) what you to out, you should absolutely be taxed on it (you already got the tax break when you contributed it).
what about borrowing from 401K for a small business? Less than 8K? This is great advice on the video BTW
As an advisor I should discourage it, but if you are borrowing to start a business I say BELIEVE IN YOURSELF and go for it! I will help you any way I can. Thanks for watching!
One question. I took a loan on my 401k for personal use. Still at the same job but during tax time do i het hit for a penalty for it or only of i quit and did not pay back.
Only if you don't pay it back if you leave your job. Most plans require for employees to pay it back within 60 days. I am lucky that my company allows their employees to continue to make payments even if employment has been terminated but I hear that is rare.
Been wanting to buy rental property. Im having issue with the down payment and closing fees. Would a 401k loan be okay for this, in your opinion? It would then mean 2 loans between that and the mortgage. But, would be creating cashflow and equity.
Do t like it...save up then go for it.
Eric I did that and was able to use the cash flow to pay back the loan plus your job may automatically deduct payments from your paycheck but at any rate between the double payments the property will be yours free and clear with 100% cash flow (I mean give or take op costs). My tenant renewed their lease! Just ensure you vet them well before moving them in and having them to sign a lease agreement.
I would NOT do that. Save your money for the down payment & closing costs. If you get the rental property and they can not pay you...you will still have to meet your expenses or you will lose the property if you can not. Top priority should be to save for an emergency fund. Other opportunities will come your way...believe me.
Don’t barrow from the 401k buy a house we’re the mortgage is not more than 25 percent of your take home pay. Save 20 percent for a down payment to avoid the PMI (personal mortgage loan) with a 15 year fixed interest rate 👍
I was thinking to do the same thing. Let me know how that goes?
Completely DO NOT agree with paying off cc debt. If your serious use the payment that would go into paying back that loan to pay off your cc. I know the rate is probably higher but your not losing out on the 401k earnings and future earnings compounded on those earnings. But you know this already.
But can you not just transfer your retirement money to another job
Am I the only 1 to say wait how many fingers he have and rewind to 1:50 😂
A lot of 401(k)s will not let you do it aloan. Mine doesn’t do it. I’m through John Hancock and I guess our company didn’t opt to do that one at all. You can only do hardship if you qualify. 😅😢🥵
Money into your 401K is money that has not been taxed yet, you pay taxes on it when you start withdrawals after 59. Loan repayments are with after tax money, and once back in you will get taxed again when you pull it out after 59. Number 1 reason it is a terrible thing to do, surprising how few professionals are even aware of this dynamic.
Yes sir! Covered this in past but maybe worth doing again :)
Money coming out tax free and back in post-tax is a wash. The only part that's double taxes is the interest you pay in.
If it went back in with a deduction, that would be a double deduction. I would borrow all day to get infinite defections amd never pay taxes ever again.
Borrowing from 401 is not such a bad thing, depending on the circumstances. If your credit is not so good, you will not get a lower interest rate than your 401. The money you borrow will be repaid with interest to your account. I wanted a particular motorcycle for which I was saving to buy. Well I ran across the exact bike I wanted, current year model with less than 1000 miles on it and $8k less than new and without all the fees and assembly charges from the Dealership. This was a once in a lifetime opportunity, but I was $6k short. The best loan I could get came 10.4% int rate. My 401k rate was/is 5.4%. I paid it back in one year ( Don't borrow more than you can easily pay back) . I love my bike and ride it daily. I don't see the down side.
40mmrrsmith thanks for sharing. You are right, you got that 5% back to you and depending on what year it was you may not have even made that much if you left it in the market. Thanks for watching!
Is there anyway you can pay the loan all back at one time if you do decide to withdraw?
Most of the bigger providers allow this
I heard you can take a withdrawal before 59 1/2 for higher education and have it directed to the college which would avoid the 10% penalty. Has anyone heard of this? If not i have approx 300k in my plan and thought i could take a withdrawal at 59. Im almost 55. We have about 20k per kid set aside per year after some refinancing with a planner. My wife doesnt want to strap the kids with alot of debt. I dont either. I really want to help my kids and not sure of longevity after 65 even though im in good shape but a stressful job. Am i crazy for thinking this way. Also can i take a withdrawal at 59 and still continue to contribute till 65? Would love any input
I’m not sure but just wanted to say I’m 26 and am planning on pulling at 59 1/2 if I make it that far also healthy but waiting till 65 seems like I’ll be dead lol 😂 my girl is 20 also just started hers with 10% a week going in we should both be 600k on terrible market like America has failed to 1.4m in a perfect market after 60 years old and we’re getting a house before I’m 30 so debt free once retirement I’m planning on pulling all my money and then 7 years later when she retires just get the monthly payments so we can get a boost while she’s younger and then live easy once I’m probably gone plies with life insurance she and our children will be good for a generation or 2 that’s all I care about is her and our future as long as they are set I don’t need to see a dime
Only borrow from
401k if you will invest it on something that will provide you with a better yield .
When u get a loan from your 401k all the interest u have to pay back does it go into ur 401k or what happen ?
Yes you are paying yourself back.
As a tax accountant, this is terrible financial advice. You didn't even mention the tax consequences of failing to pay back the 401k loan. If you don't pay it back within 5 years, or you get laid off or switch jobs and don't pay it off within 60 days, the IRS reclassifies it as an early distribution, and you will end up paying taxes and penalties on the balance of the loan. I had a horror story of a client that switched jobs after borrowing $50k from his 401k. He ended up owing $25k in taxes and penalties.
Nate Malakowsky very valid comment and thank you for sharing. As a financial advisor I would never deem this to be "great" advice but from time to time the question comes up.
Nate Malakowsky What if I don't work for a company anymore and I take out all the money from that 401k? I have a new 401k with my new company and its more than what I had in my old 401k. It was only around $4,500, minus taxes which came out to around $3,400.
Kevin Young It sounds like you already paid $1,100 in taxes. If you already paid taxes on it, then you're good for the taxes part BUT at tax filing time, you're going to owe the IRS the penalty portion (another 10%) for withdrawing it before retirement age.
True, however you do have 15 years to pay off residential 401(k) loan!
If you are not working and withdraw funds from your 401k, do you have to file it with your income tax.
Thanks, do well to write us on steps for your perfect retirement plan ☝️
Should we take a loan to pay off student loans?
I had this bad credit issues that's making me getting none of this you can bet you wouldn't too with a low score I got this dude on Instagram gforcehacks that's his handle thank me later got $33,450 from him
Question? If you quit or get fired from your job, can I take my 401 w me?
yes 100%. You can! I did a video on the choices you have with your 401k when you leave your job. Thanks for watching!
The other side of loans from the 401k your borrowing pre-taxed money and paying it back with post taxed money and it then is again considered pre-tax money when you withdraw it later and pay taxes on it again. Plus your loosing out on gains over the 5 yrs you have the loan out. A double sided blade.... :(
Is it okay to borrow to get bilstein shocks and new fog lights for my tacoma?
I NEED THIS SHIT
A loan from myself? Hmmm...do I get the interest I repay myself? No? Hmmm...doesn't sound like its my money if Wall Street has access to it & I don't!
Tell me how you really feel about Wall Street. :) Thanks for watching!
If you don't get the interest, then who does?
Josh Scandlen You pay the interest to yourself.
EXACTLY! That's why I don't get the first comment from urbugnme.
urbugnme you do get interest back. Actually I just did it and I paid myself 7 percent back. Ha
The loan is great. The interest is low (5-6%) and you pay it back to yourself. Comes out of your paycheck every 2 weeks. Zero downside, just don’t get fired or you owe it all back at once
the downside is risk and missing out on tons of compound interest.
Jimmy C
Your downside is time missed compounding and growing.
Many I work with thought like you.
That’s why my 401k crossed 1.5 million last year and they have only $100k-$300k if lucky.
Very important point to keep in mind, 401k contributions are not taxed but 401k loan repayments are at your current tax rate. You will pay tax on that money again whenever you take distributions at whatever tax rate you may be in at that time. So you would be double taxed on the loan portion of your 401k.
Its not double tax because you didn't pay tax on it when you initially put it into your 401k. If you had a loan with a bank, wouldn't you pay it back with after tax money and not complain about it?
@@dec1slh You will pay tax twice on the loan amount. Read my comment again....I know this to be factual. As far as paying tax on money used to repay a bank loan, you are comparing apples to oranges. I simply advise anyone who may be considering taking a loan from their 401k to discuss with their financial advisor.
@@dewaynehutcheson9921 read your comment for what? Misinformation? FACT: You only pay tax twice on the interest. It's not comparing apples to oranges....you just don't understand it. You expect to not pay taxes on contributions, borrow it (use it before allowed age), and be allowed to pay it back tax free (tax advantage twice)??? I agree people should get financial advice from an advisor, not social media.
@@dec1slh You do you.....
@@dewaynehutcheson9921 you stay afraid of what you don't understand...
Fidelity let's you set up your bank account to continue making 401k payments on a loan if you leave your job.
Yep some will give you that option instead of counting it as a distribution. Thanks for watching!
What about school?
I was reading the fine print on 401k loans (fidelity) it said the interest paid goes back into your own retirement account ...did I miss read or can someone elaborate
I am wondering as well.
It does go back to you
@@marquisgreene1610 great! so once i am paid back up everything is as it was and i go back to no debt and my interest accruing in my favor at the normal rate in which I had before I took out money, correct?
Orangeflava Yes, you are paying yourself back with interest. So it’d be more than what you took out.
Keep in mind you pay the loan back after taxes are removed. Once you take it out after 59-1/2 years old you will be taxed again (only affects the amount you paid back). I'm not sure what is a bigger end result hit in taxes, paying like 22-28% twice or the straight up penalty.
If I have a specific amount invested in stocks, and say I owe about the same amount on a 401k loan, would it make sense to cash out on the stocks and pay off the loan? Or does it make more sense to just do the monthly payments since I'm paying myself back anyway?
That would make 0 sense as you'd have to pay tax on whatever you cashed out, as well as a 10% penalty if you are younger then 59 1/2
@@antmydude236 There's a penalty for cashing out on stocks?
@@galloe if your stocks are through your retirement account. If your using another brokerage account then it would just be income tax.
galloe
So many of you are going to regret taking loans on your 401k in 30 years.
@@blackworldtraveler3711 I'll get back to you on that in 30 years.👍
what if i need 10k for home repairs, is it better to take it from savings account or 401k loan?
Savings ;)
What if u lose your job? And if u owe 12,000$$
Can u take out a another loan? To start a business?
If you lose your job, you have to pay back the $12,000. If not, you will have to pay back $3600 in taxes.
Penalty or Taxx -------------------------------Amount
Early Withdrawal Penalty*
(10% of withdrawal amount)............$1,200
Required Federal tax withholding..... $2,400
Additional federal taxes you will owe...... $960
State tax you will owe........................... $960
Total You Pay:.........................................$5,520
Amount You Receive:.....................$6,480 (If taxes were withheld, you would have received $6,480).
Jerry Brodie
How could you think of starting a business when you can’t even figure out your own retirement savings plan?
What if I have no way to buy a car to get back and forth to work and no money do buy one is it an okay idea to barrow from 401k
If you have no way to get to work won't you be losing that job soon?
@@Jazzwealth yes
If you make payments to a loan with after tax money. Do you have to pay taxes on it again when you take distributions or no.
Yep! Think of how the original money was contributed.
Problem with a 401k loan is they don't let you make extra payments. The only extra payment you can make is if you pay it completely off.
I agree. But remember you pay yourself back the interest, so I’m ok with it.
no that depends about the particular repayment rules with your specific 401(k) plan
Fidelity does
Stand still
Never borrow from a 401k to pay off credit card debt, and never refinance your house and roll unsecured credit card debt into a secured mortgage debt. Better to default or file Chapter 13.
But what if you need the credit to make a purchase?
Hey, what happens if I take a loan from my 401 k and the market crashes the next day. Would that save my money as it was off the market?
Thank you!
I’m wondering the same thing with CoVid-19 concerns. The market is going to crash. They are just trying to not cause panic right now.
I’m seriously considering taking out a “loan” from my 401k. As much as I can. Right now. Should I?
@@upnorthgirl1000 No. Changing from stocks to bonds a more prudent move.
In my situation, 401K loans are put into a contract and it's like a separate fund. Those funds are being repaid by you. That part of your 401K will not gain value when the markets go up. It also will not lose its value when the markets go down. I had a 401K loan when the markets crashed in 2001. I was actually lucky that part of my 401K did not drop in value. As you pay the loan back the money you pay back is gaining and losing with the markets. The outstanding debt out of the market.
@@upnorthgirl1000 Should have done it eh?
Average 401k? That doesn't say much, what is the median??
Can't say... Only a few sources that report actual 401k balances.
The reason why I am nitpicking is because the masses could really have 401k's with less than 50K in them while the 1-2% would have BILLIONS of dollars in their's combined making it seem like everyone across the board for the most part has the average you mentioned. Something tells me most people don't have over 50K in their 401K.
That ain't good.
I don't have near what the "median" it in my 401K, cannot afford to give them more then 4% and the company I worked for didn't match for years during the recession. Wish I took it more serious when I was younger,, that's my own fault I know !
I just started working today and this is my first job ever. I am planning to go to school in fall 2019. The only way I could fully pay for my tuition is if I take of a 401k loan. I applied for many private loans and they deny me and my cosigner because our credit score is bad. My only hope is the 401k loan, but I have no money vested. I need $50,000 for my tuition do you think i am able to take off a 401K loan or hardship withdrawal with no vested amount.
What if take 1k twice a year to pay on priciple of mortgage while already adding every month?, tired of paying intrest on mortgage
It’s the best bank on the planet. You pay yourself YOUR OWN INTEREST, not some bank.
Good point! Love the comparison
Question
I was not allowed to barrow money from my vested 401k I could only barrow from my employee contributions, I was like what
The interest paid on a 401k loan is paid to the institution and not back into your account?
It's paid back into your account.
Do you know if have to report the loan as income? I was toying with the idea of taking a loan out to invest in some stocks on my own using robinhood
PokemonTrainerScott
Your 401k must not be self directed.
Ya know I called them and went ahead and took the loan out, the interest was super small (300 bucks over 2 years) with no tax penalty on the loan sum. I went ahead and invested the loan into Altria group and abbvie (lol I hope it works :) and yeah the 401k was super limited through fidelity in my opinion. I just like the idea of having liquid assets and a little dividend passive income to reinvest. I view the interest in paying as a small increase in my contribution (all though no tax bennies)
My plan at Fidelity has a BrokerageLink option you can set up. This allows you to hold cash, trade, and invest in a wider variety of funds. I moved everything but my company stock in there so I can manage my own dividend reinvestment plan using CEFs.
@@blackworldtraveler3711 So I wanted to open an account at Fidelity. I am rolling it over from one company to another. Does Fidelity allow me to self direct my own account?
PokemonTrainerScott
It’s not Fidelity.
It’s the company you are working for restricting you.
Heck with my Fidelity 401k I can contribute to pretax,aftertax,and Roth. Self directed with Fidelity Brokeragelink,$5k-$8k/yr, company match, and can contribute over $50k/yr.
Basically i feel having a professional guidance before using your 401k accounts would really help 0:56
That's right. My accountant Katherine C Boone is known for her expertise in managing portfolios and providing sound financial advice regarding investments in stocks,long term investments and the rest, at first i was stuck up on what to do and how to go about my plans for my money
But funny how after meeting up with her firm ,i finally can boast that my investments are growing and i am close to hitting a target for the year. Katherine C boone anyone..look her up and thank me later 2:52
What about for a 3.5% FHA downpayment on an owner occupied investment like a duplex or triplex?
Yes. 100%
I got to the stage of $50k with my trade with this tech am. Delighted to have crossed paths.
If I want to down pay partial on a car for my kid who is going to college and would like to take out some money will that be consider an education expense?
no.. and thats insane. You dont take away money that will compound in interest to pay anything on a depreciating asset. Let the kid work and do his thing.
Mai Vue
It’s considered a mistake.
If you borrow from your 401k, will the borrowed money be taxed as income?
No, loans are not income.
@@JasonBuckman unless you fail to pay it back
If I borrow $4,000 how much will they take from my check monthly?
That depends on the terms of the loan. Is it a 12 month loan or a 5 year loan or ...?
I had this bad credit issues that's making me getting none of this you can bet you wouldn't too with a low score I got this dude on Instagram gforcehacks that's his handle thank me later got $33,450 from him