Quote:
Originally Posted by jIM_Ohio
This would be tax free income in retirement and access to this money is possible for early retirement. A 401k could have access via a loan (which I think is better than a Roth withdraw). Under proper circumstance (I have used 401k loans twice when I needed money). It's like a bond fund in 401k with me paying the interest to myself. From a tax standpoint it's not a good deal, but it's a way to leverage the assets one has.
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I think we all agree that borrowing or withdrawing any money from a retirement account should be viewed as a "last-ditch effort" to get money. However sometimes it has to be done but taking a loan out of a 401k is something to be avoided IMO. Taking money from a Roth isn't good either because you can't put that money back due to yearly maximum contribution limits but there are more pitfalls with a 401k loan. Besides the "double-taxation" aspect of it, you also put yourself at great risk if you should leave the company while the loan is outstanding. If you don't pay it back within a set amount of time (usually 60 days) of leaving the company, the loan is then considered a premature distribution and would be taxable and subject to the 10% early withdrawl penalty if you're younger than 59 1/2.