Oops, I did it again, (and I ain't even blonde).
A little over three years ago I took a loan on my 401K. Have you ever considered borrowing money from yourself?
At that time the important factors for me were-
If I lost my job, I'd have to pay the loan back in its entirety.
The money you borrow is deducted from the working part of your 401k... and won't be earning interest.
If you are under age 59-1/2, and don't pay the loan back, you'll have to pay a penalty on the unpaid portion. (Not a factor for me.)
At the time, the loan rate I'd be repaying myself was 9.25 percent, and that rate was higher than the market was paying, but still lower than the interest I was paying on the other bills... Win/win.
I repaid the loan over three years and was paying myself that 9.25 percent interest while most of my other investments were earning a negative return.
Now that the loan is repaid, I'm gonna do it again, but for slightly different reasons:
The loan rate this time is only 7.25%.
Using this money to pay off other bills I'll be virtually debt-free. The debts I'm paying off are charging me much more than 7.25%, so again this is a win/win.
We've seen that our Federal government has put out a "Notice of proposed rulemaking" signaling they may abscond with our retirement funds and give us a "guaranteed income" account in return, (like the WILDLY successful Social Security Insurance program).
If they decide to steal my money, there will be less to steal since I took the loan.
The seven and-a-quarter percent I'll be repaying my own retirement account is still a LOT more than that money is making in the market right now.
Only time will tell if this is actually a good move. But right now I think the upside of taking the loan FAR EXCEEDS the downside.
Watch with me over the next three years and see.