Retirement Tips

Retirement Investing - Borrowing From Your 401k - Part 3

November 2nd, 2006 by Papabear

So far we’ve discussed 4 reasons borrowing from your 401k account might be a good idea and 2 reasons to reconsider. Today we’ll finish out the 8 things to consider with 2 more reasons you might not want to borrow:

7. A home equity loan may be a better solution from your particular situation. Most states, with the notable exception of Texas, where I live, have made setting up a home equity line of credit simple. If you have enough equity in your house, and you have a good credit rating, you should consider a home equity loan. Unlike a loan from your retirement account, the interest you pay on a home equity loan is usually tax deductible.

8. There may also be special deals available that are better than a loan from your 401k account or a home equity loan. For example, at the time this is being written, several car companies are offering 0% financing for up to 60 months. If you qualify, this is a much better way to finance a new car that borrowing from your 401k account or using a home equity line of credit to buy a new car.

In conclusion, everyone’s situation is a little different. When you’re talking about $1,000’s of dollars and the impact of tax laws, it’s always best to get professional advice from an accountant or tax attorney. It may cost you $100 to $200 for a simple consultation, but it will be money well spent to find out what’s right for you and your situation.