1) If you take out a loan and are employed, the money comes back out of your payroll and goes back into the plan - as does the interest on the loan - since you are essentially borrowing money from yourself. Yes, it hurts your nest egg temporarily and over the long run, but it isn't fatal as long as you stay employed and the debt gets paid.
2) If you take it out as a payment, you get hit with high taxes twice - first at the time of withdrawal and secondly as income. When I did it, there was no preconditions for hardship and I did not have to get permission from my employer. I'm also below age 59.
3) When a co-worker was asked what happens if he loses his job and has a loan outstanding, he was told he would be sent a passbook and would be expected to make monthly payments as before. ABC News said you have to pay back every penny to the 401k immediately, which would be a hardship to most people who took out the money in the first place.
4) The interest rates on the loans were much better than what I could have had with a personal bank loan, which is why I took them out. You could not withdraw more than 50% of your balance and could not take out more than two loans at a time.
1) If you take out a loan and are employed, the money comes back out of your payroll and goes back into the plan - as does the interest on the loan - since you are essentially borrowing money from yourself. Yes, it hurts your nest egg temporarily and over the long run, but it isn’t fatal as long as you stay employed and the debt gets paid.
Yes. We did that 10 - 15 years ago to pay off credit cards and came out with more money each paycheck. Best thing we ever did.
“2) If you take it out as a payment, you get hit with high taxes twice - first at the time of withdrawal and secondly as income. When I did it, there was no preconditions for hardship and I did not have to get permission from my employer. I’m also below age 59.”
Actually you will pay a 10% penalty for the withdrawal and then you will be taxed at your current rate.