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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Where to get the money
WWYD. If you had a sizeable expense coming up and didn't want to wipe out your savings would you opt for a home equity loan or a loan against your 401(k)? The loan would be paid back within 3 years maybe sooner.
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Posted 5/29/12 3:00 PM  |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: Where to get the money
I would use a HELOC over 401k loan.
Normally if you leave your job you have to payback the loan. I have seen HELOCs advertised for Prime - 1/2% (2.75%) plus you may be able to write off the interest.
You could find a 0% CC with a low fee to try to use for 18 months or so.
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| Posted 5/29/12 3:22 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Where to get the money
Posted by MegZee
I would use a HELOC over 401k loan.
Normally if you leave your job you have to payback the loan. I have seen HELOCs advertised for Prime - 1/2% (2.75%) plus you may be able to write off the interest.
You could find a 0% CC with a low fee to try to use for 18 months or so.
I could try to use a 0% card or a few cards like that. 0% wins in my opinion but the 401(k) loan interest goes back to you.
If I get let go I will have 12 months to repay the loan.
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| Posted 5/29/12 3:36 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Where to get the money
Posted by Blu-ize
Posted by MegZee
I would use a HELOC over 401k loan.
Normally if you leave your job you have to payback the loan. I have seen HELOCs advertised for Prime - 1/2% (2.75%) plus you may be able to write off the interest.
You could find a 0% CC with a low fee to try to use for 18 months or so.
I could try to use a 0% card or a few cards like that. 0% wins in my opinion but the 401(k) loan interest goes back to you.
If I get let go I will have 12 months to repay the loan.
HELOC is out..not enough equity. I just refi'd.
So it looks like a combo of 0% cards and possiblly a 401k loan. Maybe I can do it without it if things go ok.
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| Posted 5/30/12 11:01 AM |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: Where to get the money
Posted by Blu-ize
Posted by Blu-ize
Posted by MegZee
I would use a HELOC over 401k loan.
Normally if you leave your job you have to payback the loan. I have seen HELOCs advertised for Prime - 1/2% (2.75%) plus you may be able to write off the interest.
You could find a 0% CC with a low fee to try to use for 18 months or so.
I could try to use a 0% card or a few cards like that. 0% wins in my opinion but the 401(k) loan interest goes back to you.
If I get let go I will have 12 months to repay the loan.
HELOC is out..not enough equity. I just refi'd.
So it looks like a combo of 0% cards and possiblly a 401k loan. Maybe I can do it without it if things go ok.
That sounds like a good plan. espeically if you get 12 months to pay back your 401k loan. I get a ton of 0% offers daily - just watch the transfer fees I have seen some as high as 5%.
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| Posted 5/30/12 12:29 PM |
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maybesoon
LIF Adult
Member since 9/09 5981 total posts
Name:
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Re: Where to get the money
I would try the zero percent card first, Good luck!
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| Posted 5/30/12 6:52 PM |
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LSP2005
Bunny kisses are so cute!
Member since 5/05 19461 total posts
Name:
L
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Re: Where to get the money
do you have to buy it? Can you get something less expensive. IMO if you have to tap your 401k, then you can't afford it. Sorry.
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| Posted 5/30/12 7:30 PM |
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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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Re: Where to get the money
Posted by LSP2005
do you have to buy it? Can you get something less expensive. IMO if you have to tap your 401k, then you can't afford it. Sorry.
Agree with this 100%. I would try hard to avoid the large purchase, or get it at a later date. Retirement money should not be touched.
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| Posted 5/30/12 8:47 PM |
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Re: Where to get the money
My 401K is basically my major form of savings at this point.
I would not want to touch it for anything; I would rather drain the rest of my other savings accounts before that.
IMO it's also way too easy to get over our head when we start to charge things. I always like to use that as a last resort, because I've found if I use my credit card for even a few "emergencies" all of a sudden I'm back up to a large debt.
At least with savings, if you take money out, it's a lot easier to build that back up vs. coming up with credit card payments all the time.
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| Posted 5/30/12 9:27 PM |
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queensgal
Smile
Member since 4/09 3287 total posts
Name:
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Re: Where to get the money
Posted by Blu-ize
Posted by MegZee
I would use a HELOC over 401k loan.
Normally if you leave your job you have to payback the loan. I have seen HELOCs advertised for Prime - 1/2% (2.75%) plus you may be able to write off the interest.
You could find a 0% CC with a low fee to try to use for 18 months or so.
I could try to use a 0% card or a few cards like that. 0% wins in my opinion but the 401(k) loan interest goes back to you.
If I get let go I will have 12 months to repay the loan.
Careful with this regarding 401k loan. You are double taxed on it. When you repay your 401k, you have to do so with after tax money. Then, when you actually retire, you will pay taxes again on that money.
Not sure how big of a loan you are talking about, but the double taxation is a big negative.
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| Posted 6/3/12 9:23 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Where to get the money
Posted by queensgal
Careful with this regarding 401k loan. You are double taxed on it. When you repay your 401k, you have to do so with after tax money. Then, when you actually retire, you will pay taxes again on that money.
Not sure how big of a loan you are talking about, but the double taxation is a big negative.
You aren't double taxed because you are borrowing against money that was saved on a pre-tax basis. "Double taxation" is a HUGE myth and simply not true.
http://thefinancebuff.com/401k-loan-double-taxation-myth.html
Message edited 6/5/2012 9:14:58 PM.
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| Posted 6/5/12 9:12 PM |
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Mrs213
????????
Member since 2/09 18986 total posts
Name:
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Re: Where to get the money
I would do a 0% cc before doing the 401k
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| Posted 6/7/12 11:51 AM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Where to get the money
Posted by ave1024
Posted by queensgal
Careful with this regarding 401k loan. You are double taxed on it. When you repay your 401k, you have to do so with after tax money. Then, when you actually retire, you will pay taxes again on that money.
Not sure how big of a loan you are talking about, but the double taxation is a big negative.
You aren't double taxed because you are borrowing against money that was saved on a pre-tax basis. "Double taxation" is a HUGE myth and simply not true.
http://thefinancebuff.com/401k-loan-double-taxation-myth.html
Also you pay yourself back interest.
But I may not need to do that. I may be able with the way I have to payout, use savings and 0% cards.
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| Posted 6/7/12 5:44 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Where to get the money
Posted by Blu-ize
Posted by ave1024
Posted by queensgal
Careful with this regarding 401k loan. You are double taxed on it. When you repay your 401k, you have to do so with after tax money. Then, when you actually retire, you will pay taxes again on that money.
Not sure how big of a loan you are talking about, but the double taxation is a big negative.
You aren't double taxed because you are borrowing against money that was saved on a pre-tax basis. "Double taxation" is a HUGE myth and simply not true.
http://thefinancebuff.com/401k-loan-double-taxation-myth.html
Also you pay yourself back interest.
But I may not need to do that. I may be able with the way I have to payout, use savings and 0% cards.
I'll put out one MAJOR drawback to a 401k loan that you have to consider. Where the market is when you draw on the 401k and where you think it will be when you pay it back.
Case & Point: You decide to take the $50,000 401k loan out when the DOW was say hovering around 14,000. You just pulled $50,000 from your investment avenue that can either appreciate OR depreciate. After doing this the market takes a turn for the worse and the DOW drops down to around 12,000 by the time you are ready to pay the loan back. When you go to pay the loan back, you are then buying the shares at a likely much LOWER price. This is a GOOD thing as you are buying the funds at a lower price than when you borrowed.
This can work both ways though. If you take out a hefty 401k loan, and then the market decides to appreciate you lose out on that appreciation. All of the "paying yourself back in interest" is not going to compare to a short term 10-15% increase on your money while your money was in hiatus with a 401k loan.
So there may be a "timing the market" element when deciding to take a 401k loan.
ETA: I'll also add one point, I currently think the market is on the LOW side. Great time to buy IMO. NOT a good time for a 401k loan. I can see the DOW back at around 13500 in the next few months. This is of course my OPINION as nobody can predict the market.
Message edited 6/9/2012 12:26:19 AM.
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| Posted 6/9/12 12:23 AM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Where to get the money
Posted by ave1024
Posted by Blu-ize
Posted by ave1024
Posted by queensgal
Careful with this regarding 401k loan. You are double taxed on it. When you repay your 401k, you have to do so with after tax money. Then, when you actually retire, you will pay taxes again on that money.
Not sure how big of a loan you are talking about, but the double taxation is a big negative.
You aren't double taxed because you are borrowing against money that was saved on a pre-tax basis. "Double taxation" is a HUGE myth and simply not true.
http://thefinancebuff.com/401k-loan-double-taxation-myth.html
Also you pay yourself back interest.
But I may not need to do that. I may be able with the way I have to payout, use savings and 0% cards.
I'll put out one MAJOR drawback to a 401k loan that you have to consider. Where the market is when you draw on the 401k and where you think it will be when you pay it back.
Case & Point: You decide to take the $50,000 401k loan out when the DOW was say hovering around 14,000. You just pulled $50,000 from your investment avenue that can either appreciate OR depreciate. After doing this the market takes a turn for the worse and the DOW drops down to around 12,000 by the time you are ready to pay the loan back. When you go to pay the loan back, you are then buying the shares at a likely much LOWER price. This is a GOOD thing as you are buying the funds at a lower price than when you borrowed.
This can work both ways though. If you take out a hefty 401k loan, and then the market decides to appreciate you lose out on that appreciation. All of the "paying yourself back in interest" is not going to compare to a short term 10-15% increase on your money while your money was in hiatus with a 401k loan.
So there may be a "timing the market" element when deciding to take a 401k loan.
ETA: I'll also add one point, I currently think the market is on the LOW side. Great time to buy IMO. NOT a good time for a 401k loan. I can see the DOW back at around 13500 in the next few months. This is of course my OPINION as nobody can predict the market.
All true. I'm not planning on that much of a loan and not taking it right now. I'm trying not to take any loan but I would go 0% card first. Chase is practically shoving 0% offers down my throat right now..one until 8/2014.
So if I can manage on my savings/income and 0% cards if necessary, that's the way to go.
I have home improvements going on too in that budget so trying to make it all work.
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| Posted 6/15/12 12:11 PM |
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MrsRinNY
LIF Infant
Member since 4/10 117 total posts
Name:
Gina
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Re: Where to get the money
IMHO do everything you can to stay away from the 401k loan.
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| Posted 6/28/12 10:33 AM |
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