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I failed...he's taking the loan

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  • #1

    I failed...he's taking the loan

    So today I was playing horseshoes and having a few cold beverages with a neighbor and some friends when one of them mentioned he was getting married this coming Saturday. Naturally I congratulated him...being that he is getting married on one of the coolest holidays...but then he mentioned that he had to take out a 401k loan in order to pay for the wedding.

    *sigh

    What can I say? I did my best to convince him to find some other way to pay for it, but he said this was truly the only option. Very sad indeed that he'll be paying back pretax $ with after-tax $ and paying interest on top of it all.
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  • #2
    I would not mention it anymore because it's not your job to save him from stupdity. You already brought it up, and you did your good deed for the day, so leave it at that. ;-)

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    • #3
      It is probably too late at this point for him to change it anyway.

      I wish they would eliminate the loan provision from 401k plans. It would save a lot of people from making an incredibly stupid move.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

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      • #4
        It really does suck when you can't convince someone that what they're doing is going to be bad for them in the long run. They are probably so excited about the wedding that they can't see past it. Just smile and congratulate them! They'll realize the error of their ways and learn from it. BTW, do you know the amount? Just wondering

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        • #5
          No, he didn't share the amount with me...and I think I'm actually glad he didn't. And thanks lovcom, I will chalk it up to my good deed for the day.

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          • #6
            I don't understand why it's so stupid to take a 401k loan.

            If I understand it right, you have to move your money into a bond fund. That pays less than stocks - depending on his plan, the bond fund may look pretty good right now.

            The loan interest you pay goes into your 401k - so essentially you are paying yourself interest.

            I thought that the down side to these arrangements were: you could miss out on stock appreciation, and you would have to pay back the note within 90 days if you leave your job, or suffer the tax penalty of an early withdrawl.

            So if your alternative was to put it on a credit card at say 18%, this could be a better option.

            Am I right?

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