Posted on: 13th Apr, 2006 01:47 pm
Can I borrow from my 401(k) account to make a down payment? Will it be wise to do it?
If your companies plan permits then you can borrow against your 401(k) to meet the down payment. Whether you should go for it or not depends on how long you will take to repay once you borrow against it.
If you are going to use the home as an investment, then you need to analyze whether that investment will help you achieve greater appreciation.
There are some restrictions regarding the amount that you are allowed to borrow and the amount of time that can be given to you for repayment although they are not too difficult. One disadvantage in borrowing against is that you end up paying taxes twice on the money that was used by you.
Another thing that you need to consider is that if repayment becomes for a problem you and you suspend contributions then, you are going to accumulate less for your retirement period.
Regards,
Blue
If you are going to use the home as an investment, then you need to analyze whether that investment will help you achieve greater appreciation.
There are some restrictions regarding the amount that you are allowed to borrow and the amount of time that can be given to you for repayment although they are not too difficult. One disadvantage in borrowing against is that you end up paying taxes twice on the money that was used by you.
Another thing that you need to consider is that if repayment becomes for a problem you and you suspend contributions then, you are going to accumulate less for your retirement period.
Regards,
Blue
Hi Shaune,
The worst case can be if you lose your job or decide to change your employer. In that case the loan has to paid bck in full within a short period.
If it is not repaid then it will be considered as a withdrawal from the account and will be subjected to taxes and penalties.
The worst case can be if you lose your job or decide to change your employer. In that case the loan has to paid bck in full within a short period.
If it is not repaid then it will be considered as a withdrawal from the account and will be subjected to taxes and penalties.
It can be preferable to borrow from your account if you plan to purchase the home to live otherwise it won't be a good idea to liquidate your savings and paying taxes and penalties on your retirement accounts.
Hi Shaune,
If you are still in doubt after making a thorough analysis, then it's better not to touch your 401(k) account.
This account is meant for retirement and you should not use it whenever you need extra cash. If there is possibility for a loan from any other source, then try for that.
James
If you are still in doubt after making a thorough analysis, then it's better not to touch your 401(k) account.
This account is meant for retirement and you should not use it whenever you need extra cash. If there is possibility for a loan from any other source, then try for that.
James