Irvine Dream
New member
I thought that with a loan (not a withdrawal) you don't have to pay taxes. Can get a loan for 50% of the 401K amount or upto $50,000. You then pay back into your own 401K with interest.
Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
qwerty said:Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
what do you mean double taxation? when you borrow from your 401K there is no income to be taxed, its a loan.
Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
Can you just wait it out a little and save a bit more? Or sell something else or even get a 2nd personal loan if you can pay it off quicker?
And don't stop your 401k contributions!
1. If your employer matches a % of your contribution you're just passing up free $$$
2. The power of compounding interest in your retirement accounts is amazing. If you sat down with a advisor and just looked at how much you would short your retirement account by just stopping contributions for 1 year (in your early 30s when that $$ still have 35yrs to compound on itself) you wouldn't do it.
Never thought about that logic. Always learning something new, thanks and my wife thinks I am just wasting my time reading the forum ;DParis said:And this is a good article on borrowing from your 401k loanhttp://www.myretirementpaycheck.org...-need-to-know-before-borrowing-from-your.aspx
eyephone said:Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
Can you just wait it out a little and save a bit more? Or sell something else or even get a 2nd personal loan if you can pay it off quicker?
And don't stop your 401k contributions!
1. If your employer matches a % of your contribution you're just passing up free $$$
2. The power of compounding interest in your retirement accounts is amazing. If you sat down with a advisor and just looked at how much you would short your retirement account by just stopping contributions for 1 year (in your early 30s when that $$ still have 35yrs to compound on itself) you wouldn't do it.
Paris - please stop giving your questionable advice. What are you taking about the taxation/double taxation? How is he paying taxes when he takes out the loan? (The only tax is if he doesn't pay it back)
I think you got it confused regarding double taxation, in regards to corporations. But yeah, it's funny reading your advice.
Paris said:qwerty said:Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
what do you mean double taxation? when you borrow from your 401K there is no income to be taxed, its a loan.
Sorry let me clarify
A 401(k) loan is paid with after-tax dollars, unlike the pretax contributions that go into your 401(k). When you take that money out in retirement, it will be taxed?again. So a loan results in double taxation for you as the borrower.
And this is a good article on borrowing from your 401k loanhttp://www.myretirementpaycheck.org...-need-to-know-before-borrowing-from-your.aspx
qwerty said:Paris said:qwerty said:Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
what do you mean double taxation? when you borrow from your 401K there is no income to be taxed, its a loan.
Sorry let me clarify
A 401(k) loan is paid with after-tax dollars, unlike the pretax contributions that go into your 401(k). When you take that money out in retirement, it will be taxed?again. So a loan results in double taxation for you as the borrower.
And this is a good article on borrowing from your 401k loanhttp://www.myretirementpaycheck.org...-need-to-know-before-borrowing-from-your.aspx
eyephone is correct. there is no double taxation. and that link you cite that says the 401K loan is double taxation is incorrect. like i said before, 95% of the people in the world are stupid, and the writer of that article that thinks a 401K loan is double taxation is one of the 95%.
Tax Inefficiency - The media claim 401(k) loans are tax inefficient because they must be repaid with after-tax dollars, subjecting loan repayment to double taxation. Actually, only the interest portion of the repayment is subject to such treatment. (You can read a balanced account of why this occurs in the article Should You Take A Loan From Your Plan?)
The media usually fail to note that the cost of double-taxation on loan interest is often fairly small compared to the cost of alternative ways to tap short-term liquidity.
irvinehomeowner said:Here is another article regarding 401k loans (and why they are better for short term loans):
http://www.investopedia.com/articles/retirement/08/borrow-from-401k-loan.asp
About double taxation... that's not actually true because the money you repaying is not "new" contributions, only the interest is. So while there may be some cost because you are repaying with after-tax dollars, that impact is minimal on short-term loans.
Tax Inefficiency - The media claim 401(k) loans are tax inefficient because they must be repaid with after-tax dollars, subjecting loan repayment to double taxation. Actually, only the interest portion of the repayment is subject to such treatment. (You can read a balanced account of why this occurs in the article Should You Take A Loan From Your Plan?)
The media usually fail to note that the cost of double-taxation on loan interest is often fairly small compared to the cost of alternative ways to tap short-term liquidity.
Irvine Dream said:qwerty said:Paris said:qwerty said:Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
what do you mean double taxation? when you borrow from your 401K there is no income to be taxed, its a loan.
Sorry let me clarify
A 401(k) loan is paid with after-tax dollars, unlike the pretax contributions that go into your 401(k). When you take that money out in retirement, it will be taxed?again. So a loan results in double taxation for you as the borrower.
And this is a good article on borrowing from your 401k loanhttp://www.myretirementpaycheck.org...-need-to-know-before-borrowing-from-your.aspx
eyephone is correct. there is no double taxation. and that link you cite that says the 401K loan is double taxation is incorrect. like i said before, 95% of the people in the world are stupid, and the writer of that article that thinks a 401K loan is double taxation is one of the 95%.
Hi Qwerty
Can't someone make an argument that the interest you pay (post-tax) on the loan back into the 401K account will be subject to tax when you take it out of 401K after retiring, and hence the double taxation, see my earlier post
Deperately want to be in the 5% category
Rice Vino said:Careful with Paris. She might have husband hunt you down.
Careful with Irvine Dream. He might piece together bits of info from forum and reassemble for all to read and remove concept of anonymity.
Two real headcases.
qwerty said:a loan, regardless of who you are paying back, is always going to be done with after tax money
Irvine-ite said:So what's the verdict? Do we listen to the bad female driver with a gun or the big Mexican with a bat? Tough call.
Rice Vino said:Careful with Paris. She might have husband hunt you down.
Careful with Irvine Dream. He might piece together bits of info from forum and reassemble for all to read and remove concept of anonymity.
Two real headcases.
eyephone said:Paris said:I wouldn't take a loan from your 401k because with the penalties you pay to do it and the double taxation you set yourself up for, it's not worth it. You pay taxes to take out a loan and then at retirement when you take it out you pay taxes again. Do you really want to pay the govn't twice? I shudder at the thought.
Can you just wait it out a little and save a bit more? Or sell something else or even get a 2nd personal loan if you can pay it off quicker?
And don't stop your 401k contributions!
1. If your employer matches a % of your contribution you're just passing up free $$$
2. The power of compounding interest in your retirement accounts is amazing. If you sat down with a advisor and just looked at how much you would short your retirement account by just stopping contributions for 1 year (in your early 30s when that $$ still have 35yrs to compound on itself) you wouldn't do it.
Paris - please stop giving your questionable advice. What are you taking about the taxation/double taxation? How is he paying taxes when he takes out the loan? (The only tax is if he doesn't pay it back)
I think you got it confused regarding double taxation, in regards to corporations. But yeah, it's funny reading your advice.