Use of Refinance and liquidating 403b for debt reduction

[Petunia 100]

I found a top 10 list from CNBC about why you shouldn't borrow. Number 9 is exactly what steve said.

http://www.cnbc.com/2014/09/08/top-10-reasons-you-should-never-borrow-from-your-401k-plan.html

"You'll incur double taxation. Loans from your 401(k) actually cause you to pay taxes twice. Why? Because you're repaying with after-tax money and then later, when you withdraw the funds in retirement, you'll pay taxes on that same money again."

This is a myth that gets repeated often enough that people think it is true. You do not pay tax on the money twice. (1-1+1=1, not 2). However, you do pay tax on the repaid interest twice.

[Petunia 100]

But as to OP's question, you already owe the money. You want to pay it back with as little cost as possible.

Does it make sense to take the money out of your 403b? No. That will cost more, not less. (Assuming you are even allowed to take an in-service distribution).

Does it make sense to refinance your house? Maybe. It depends on what it will cost you to refinance, what rate you are currently paying, and what rate you can get on a cash-out refinance. You will have to find out and crunch the numbers.

Have you investigated 0% balance transfer offers, especially those with no balance transfer fees? This may be your best option.

[disneysteve]

Also, the nature of the debt (what was that money spent on?), your income, and your overall budget all matter, too. We don't know how significant 30K is for you. Did you buy stuff you could sell? Could you get extra hours at work or take on a second job? Are there places you could trim spending to free up cash for debt repayment?

[cornfieldj]

If the job ends, you have 60 days to repay and avoid penalties. Another reason to avoid taking the loan is that many plans don't let you contribute to the plan while the loan is outstanding. Check your plan documents to see what the arrangement is.

[TexasHusker]

I'm never a proponent of taking out a loan to pay off a loan.

[disneysteve]

I'm never a proponent of taking out a loan to pay off a loan.

I would disagree with that as a broad generalization.

Example: I had student loans and a car loan that were both at somewhat higher rates. We took out a home equity loan that had a better rate, and was tax deductible, and used that to get rid of the other debt. Saved us a bunch of money in interest.

Of course, you should only do this if you have the discipline to not rack up more debt.