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Old 01-20-2010, 09:51 AM   #1
Hemlawk
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401k loan for down payment?

A friend of mine insist that I'd be ok or better off borrowing from my 401k. Ive only had my 401k for maybe 16 months so its at about $10k. Apparently I an borrow 50% interest free.
Im saving for a dp, I should have about $6k this time next year. Id also use my bonus from work + tax refund. So I should have approx $10k. I want my monthy payments under $500.
Would it be wise to borrow from my 401k to increase my dp to lower my monthly payment?

I was going to get an LT but after driving a SS, I can't settle for anything less.
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Old 01-20-2010, 09:54 AM   #2
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NEVER,NEVER,NEVER,NEVER, BORROW AGAINST YOUR 401K!
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Old 01-20-2010, 09:55 AM   #3
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Don't do it. Just keep saving you will lose in the end if you take out of your 401K
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Old 01-20-2010, 10:11 AM   #4
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Borrow against and appreciating asset to pay for a depreciating asset? Not the best idea bro.
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Old 01-20-2010, 10:22 AM   #5
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Ya I know it's not smart. I won't do it. I just want my Camaro so bad. Haha
maybe I'll sell my Exelon stock... Or not
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Old 01-20-2010, 10:28 AM   #6
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Man..........you will need that money when you are old as dirt and not have social security.

DO NOT BORROW AGAINST 401K!!!
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Old 01-20-2010, 10:33 AM   #7
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After you've done that, go and get a cash out home equity loan to pay the rest. That way you can completely screw up your financial future all in one fell swoop....
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Old 01-20-2010, 10:42 AM   #8
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After you've done that, go and get a cash out home equity loan to pay the rest. That way you can completely screw up your financial future all in one fell swoop....
I don't have enough equity yet to pay for a Camaro! Ahhhh hahah I wouldn't do that. I just feel desprite for my dream car.
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Old 01-20-2010, 10:54 AM   #9
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I say spend it before the sharks on Wall Street find a way to steal whats left or inflation completely destroys its value. I know thats not a popular viewpoint but without reform, and there has been zero reform, you are a mark for the insiders.

I would enjoy it while I could or maybe find a different investment, perhaps Real Estate. If you want to see our generations retirement options, look no further than Mexico or China. The current generation of retirees is probably America's last unless something big changes.

The U.S. dollar is certainly in the process of depreciating and will probably get much worse in the near future and again, the market is rigged and currently experiencing the creation of another b.s. bubble IMO.
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Old 01-20-2010, 01:03 PM   #10
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Absolutely do not borrow against it.
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Old 01-20-2010, 01:24 PM   #11
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I say spend it before the sharks on Wall Street find a way to steal whats left or inflation completely destroys its value. I know thats not a popular viewpoint but without reform, and there has been zero reform, you are a mark for the insiders.

I would enjoy it while I could or maybe find a different investment, perhaps Real Estate. If you want to see our generations retirement options, look no further than Mexico or China. The current generation of retirees is probably America's last unless something big changes.

The U.S. dollar is certainly in the process of depreciating and will probably get much worse in the near future and again, the market is rigged and currently experiencing the creation of another b.s. bubble IMO.
I hate to say it, but as gloomy as this sounds, it is also likely the most accurate. Recently I've decreased my 401k contribution amounts, not for any other reason that having money tied into fluctuating, and at times volatile, markets is playing Russian roulette. People can call me a conspiracy nut or say whatever you'd like, but the truth is the market seems erratic and chaotic but it's also very predictable to those who own the 'game,' and the one card they could pull at any moment to crash all of us is the 401k card.

Think about it, why do all our future funds have to be so closely tied in with the market in the first place? Because it's plausible deniability and gives a back door option so that if/when the market crashes and you're left with nothing, and you can only blame yourself. And how do I know that 'they' (the Powers that Be) own the game so to speak? Because they've been doing so since at least 1815 when the Rothschilds took over Europe after the battle of Waterloo by creating a fake crash and buying up the market. The strategy has not strayed so far, only the tactics involved.

All that said, I still think it's a bad idea to borrow against for a car, but ultimately it's up to decide- since I can't judge you as I've borrowed against mine to pay off a large college loan.
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Old 01-20-2010, 01:34 PM   #12
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Don't do it!!
Don't you have to prove some kind of hardship to borrow against it anyway?? (Like you're about to lose your house or something like that)
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Old 01-20-2010, 01:52 PM   #13
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Never borrow against your retirement savings! It will cost you a LOT more in the long run. DON'T DO IT!
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Old 01-20-2010, 01:58 PM   #14
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Originally Posted by Hemlawk View Post
A friend of mine insist that I'd be ok or better off borrowing from my 401k. Ive only had my 401k for maybe 16 months so its at about $10k. Apparently I an borrow 50% interest free.
Im saving for a dp, I should have about $6k this time next year. Id also use my bonus from work + tax refund. So I should have approx $10k. I want my monthy payments under $500.
Would it be wise to borrow from my 401k to increase my dp to lower my monthly payment?

I was going to get an LT but after driving a SS, I can't settle for anything less.
(borrowing this from a friend of mine, some wisdom)

401K Loans
Before we get started, let's talk about 401K loans. You take out a loan and you pay yourself back, say 9%. Wow, you're paying yourself, minus a small 1-time origination fee. Score! right?

It's not that simple. Remember that you're paying yourself back with AFTER-TAX money. When you withdraw the loaned amount during retirement, you'll have paid taxes on the amount TWICE (once at your current tax rate, and once at your retirement tax rate). Factor that in before deciding that "paying yourself instead of the bank" is a good idea. You'll almost always find that paying the bank will be a better option than taking a 401K loan.
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Old 01-20-2010, 02:08 PM   #15
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Don't do it!!
Don't you have to prove some kind of hardship to borrow against it anyway?? (Like you're about to lose your house or something like that)
There are conditions/exceptions which potentially allow you to avoid the heavy taxes/penalties for an early withdrawal of your 401k due to hardship and this is what you're referring to, however, this is not the same as taking a loan against your 401k.
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Old 01-20-2010, 02:21 PM   #16
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Knock off the 5K down payment from the price of the vehicle... get a 1SS instead of a 2SS or...simply get the cheaper V6 so you don't have to borrow that much.

Also, it might make more sense to do this if you have a roth ira...just throwing it out there..
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Old 01-20-2010, 02:30 PM   #17
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I hate to say it, but as gloomy as this sounds, it is also likely the most accurate. Recently I've decreased my 401k contribution amounts, not for any other reason that having money tied into fluctuating, and at times volatile, markets is playing Russian roulette. People can call me a conspiracy nut or say whatever you'd like, but the truth is the market seems erratic and chaotic but it's also very predictable to those who own the 'game,' and the one card they could pull at any moment to crash all of us is the 401k card.

Think about it, why do all our future funds have to be so closely tied in with the market in the first place? Because it's plausible deniability and gives a back door option so that if/when the market crashes and you're left with nothing, and you can only blame yourself. And how do I know that 'they' (the Powers that Be) own the game so to speak? Because they've been doing so since at least 1815 when the Rothschilds took over Europe after the battle of Waterloo by creating a fake crash and buying up the market. The strategy has not strayed so far, only the tactics involved.

All that said, I still think it's a bad idea to borrow against for a car, but ultimately it's up to decide- since I can't judge you as I've borrowed against mine to pay off a large college loan.
You do know that you can controll the option on your 401k right. You were probably in agressive growth which means when you are winning you are winning but when things good bad you lose just as fast as you won. I was in that, but change my to income which puts your money into more high-yield bonds and government bonds oppose to stocks. I also did this before the crash because I had been studying the market and saw a drop coming in 2009. Luckly, I know how the stock market works and get daily reports with most reports coming onto my desk every 2 hours. Trust me you better keep your money in or you are going to regret it here pretty soon.
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Old 01-20-2010, 02:45 PM   #18
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You do know that you can controll the option on your 401k right. You were probably in agressive growth which means when you are winning you are winning but when things good bad you lose just as fast as you won. I was in that, but change my to income which puts your money into more high-yield bonds and government bonds oppose to stocks. I also did this before the crash because I had been studying the market and saw a drop coming in 2009. Luckly, I know how the stock market works and get daily reports with most reports coming onto my desk every 2 hours. Trust me you better keep your money in or you are going to regret it here pretty soon.
yeah, I understand exactly what you're talking about and I do not choose aggressive/high yield bonds for specifically that reason (which is also why when the recession hit in 2007 and most people lost half their 401k mine stayed roughly the same), however, the fact that our 'savings/retirement' funds are so enmeshed in the market is by it's very nature creating a potentially unstable variable regardless of whether you choose aggressive or conservative which is my general point, because by the very nature of the beast we now have our futures vested in markets that are unpredictable at best and have been deliberately manipulated for hundreds of years at the highest levels whenever too many people seem to be profiting too much for comfort.
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Old 01-20-2010, 03:01 PM   #19
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Originally Posted by JMM1181 View Post
I hate to say it, but as gloomy as this sounds, it is also likely the most accurate. Recently I've decreased my 401k contribution amounts, not for any other reason that having money tied into fluctuating, and at times volatile, markets is playing Russian roulette. People can call me a conspiracy nut or say whatever you'd like, but the truth is the market seems erratic and chaotic but it's also very predictable to those who own the 'game,' and the one card they could pull at any moment to crash all of us is the 401k card.

Think about it, why do all our future funds have to be so closely tied in with the market in the first place? Because it's plausible deniability and gives a back door option so that if/when the market crashes and you're left with nothing, and you can only blame yourself. And how do I know that 'they' (the Powers that Be) own the game so to speak? Because they've been doing so since at least 1815 when the Rothschilds took over Europe after the battle of Waterloo by creating a fake crash and buying up the market. The strategy has not strayed so far, only the tactics involved.

All that said, I still think it's a bad idea to borrow against for a car, but ultimately it's up to decide- since I can't judge you as I've borrowed against mine to pay off a large college loan.
They're tied into markets to combat inflation and provide real returns, not just nominal returns. If you stick your money in the First United Bank of Matress or even a savings account at a real bank, its going to be worth nothing in 40 years after inflation gets done with it.

In the long run, stocks in comparison, have inflationary pressure factored into their price but are more volatile

Thats the short explanation for why you start out in risky stocks and then rebalance into bonds and money market to protect your assets as you approach retirement....
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Old 01-20-2010, 03:07 PM   #20
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Granted you'll pay penalties for withdrawling from your 401K but again the markets are fixed. Nothing has changed from the last crash and it will happen again unless some type of reform is instituted. It wasn't an accident, it was fraud and the perps used a portion of their ill-gotten gains to renew their lease of our elected officials.

Its been said to save for a special day but every day is special. So drink the good wine and if you feel like it buy a Camaro. Everything in this world has an expiration date including you.
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Old 01-20-2010, 03:08 PM   #21
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NEVER,NEVER,NEVER,NEVER, BORROW AGAINST YOUR 401K!

Bears repeating.
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Old 01-20-2010, 03:57 PM   #22
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No borrow 401 K

I just retired 3 yrs ago. I have friends my age that borrowed from their 401K and they could'nt and still can't retire.
I NEVER, NEVER borrowed from my 401K.
DON"T unless a car is all you ever want!
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Old 01-20-2010, 06:43 PM   #23
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Did we mention that it's a really bad idea to borrow against your 401k?
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Old 01-20-2010, 09:21 PM   #24
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A friend of mine insist that I'd be ok or better off borrowing from my 401k. Ive only had my 401k for maybe 16 months so its at about $10k. Apparently I an borrow 50% interest free.
Im saving for a dp, I should have about $6k this time next year. Id also use my bonus from work + tax refund. So I should have approx $10k. I want my monthy payments under $500.
Would it be wise to borrow from my 401k to increase my dp to lower my monthly payment?

I was going to get an LT but after driving a SS, I can't settle for anything less.

You have a financially ignorant friend.

And spare me the "nice" lecture. (to those who like to may be thinking I am a prick) Ignorant is a very accurate and mild mannered description of him based on his financial advice.
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Old 01-20-2010, 09:29 PM   #25
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I borrowed five grand from my 401K for an emergency.It is automatically deducte each payday from my check.I pay four percent interest on the loan, and that 4% also goes back into my 401K.It's MY savings and I'm paying MYSELF back w/interest.It's like everything else in life,do things responsibly.
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