a few reason you don't want to do it

1. If you lose your job, you will have to repay the loan within 60 days or it will be considered an unqualified withdrawal. This means you lose any future tax advantages on that amount, and you will be subject to income tax plus a 10% penalty on the amount. This would boost your effective interest rate dramatically.


2. 401(k) funds are protected from creditors, even in the event of Bankrupt. If you borrowed money on a credit card and don’t pay it back, your credit score will tank but nobody will take money out of your hands. Just like how home equity loans can be dangerous because you are risking your home, unsecured debt is always better than secured debt. If something is so bad that you need to sacrifice your retirement savings, then bankruptcy may not be that far-fetched. Is this a one-time need, or are you just putting off the inevitable?


3. Some 401k loans do not allow new contributions if you have loan outstanding. So you could be losing out on some 401k matching contributions. This loss would also drive up the effective cost of a 401k loan.

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• thank you for mentioning bankruptcy... -美西游子- ♀ (2797 bytes) () 04/19/2012 postreply 18:38:56