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Posted in Retirement
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1977mdickerson

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is it smart to get loans from 401k to invest in other areas

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NO...NO...NO...NO DEAL!

First you pay a 10% penalty right off the bat. Second the amount borrowed is taxed at your income's tax bracket. So you are borrowing money FROM YOURSELF, at a penalty AGAINST YOU, pay Uncle Sam some more, end up a fraction after all is process, then OWE YOURSELF the amount borrowed to go back to your 401(k). 

Assuming you are in the 22% tax bracket. You are borrowing money at a 32% interest rate (22% + 10% penalty) then have to pay yourself back while that money in the 401(k) could still make profits if you choose not to touch it. 

Top Contributor
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Aloha 1977M****erson, that is playing

Aloha 1977M****erson, that is playing with FIRE. I would warn you against it. The most often overlooked detail on this is that if you leave your employer, you will have to pay the total amount in FULL or it will be counted as INCOME and TAXED as such. Bad bad juju in my opinion. There are better ways to get ahead in life. This is not one of them.

Good luck and best wishes.

Very Respectfully,

Spartan Hiker

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No, by asking this question I can't see you making any solid investment decisions.

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