Quote:
Originally posted by NoSoup
Check with your employer, many offer their employees to take out a loan against their 401(k) plans
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401(k) loans have a somewhat hidden downside to keep in mind......you are going to be forced to pay taxes
twice on the money.
Here is how it works.....your contributions to the plan are typically pre-tax (and therefore untaxed). It is those contributions, plus or minus earnings, that you take out with the loan. When you repay the loan through payroll deduction or other means, you must repay with after-tax dollars. You pay taxes -- for the first time -- on that compensation in the year it is earned/received. You pay taxes a second time when you take a distribution from your account.
Getting taxed once is bad. Getting taxed twice is worse......unless there is a very strong reason for doing it. I work in the 401(k) industry and think plan loans are generally a bad idea. That being said, I took one out to help purchase my home. My advice.....think twice about tapping into your retirement savings.