- quote -

information.

As in this case, you answer must be qualfied in order to be correct.

- quote -

If his company's plan has a provision that allows for money to be borrowed in
the manner of a true mortgage for his home, his interest payments on the loan
would be tax deductible.

Few plans have this provision, but it is possible.

ANSWER TO YOUR QUESTION :

vids808 wrote:
- quote -

NO THEY ARE NOT. YOU ARE BORROWING TAX SHELTERED MONEY, PAYING IT
BACK WITH TAXED MONEY AND... JUST FOR SOME ICING ON THE CAKE... YOU"LL
BE TAXED ON IT AGAIN WHEN ITS DISTRIBUTED TO YOU (NO IT DOES NOT COUNT
AS AN AFTER_TAX CONTRIBUTION WHICH WOULD EXEMPT IT FROM TAXATION UPON
DISTRIBUTION). IF YOU ARE IN, SAY THE 30% TAX BRACKET, THE ULTIMATE
COST OF YOUR 401(k) LOAN IS:

THE 5% INTEREST YOU PAID ON THE LOAN (WHICH IS ESSENTIALLY PAID TO
YOURSELF), THE LOSS OF THE TAX-DEDUCTIBLE INTEREST STATUS FROM YOUR HOME
EQUITY LOAN WHICH GOES AGAINST CURRENT INCOME... AND... 30% OF THE LOAN
PRINCIPLE PLUS ACCRUED INTEREST WHEN YOU TAKE THE DISTRIBUTION

TODAY'S LESSON... THE 401(k) LOAN IS NOT A GOOD DEAL!!


Like a 401k contribution?
- quote -

"vids808" <vids808[at]yahoo.com> wrote in message
news:37a24b91.0401261241.6cb34e6c[at]posting.google.com...
- quote -

The loan is tax free, unless you trip a trigger (i.e., seperation from
employment, default). You can't deduct money going back in to repay the
loan. If you could, you'd be deducting the same dollars more than once. The
Service would take exception to that. =)

- quote -

Most plans allow for continued contributions. In fact, I've never seen one
that didn't. Employers often WANT you to contribute, because this helps in
their top heavy testing (this is often WHY they match).

But, here's the deal -- The BEST source for this information will be the
plan summary document that your employer provided you, supplemented by your
human resources people, if any, and perhaps the plan provider.

While there are a lot of plain vanilla proto-type document plans inforce,
many plans are custom, which makes plan specific questions all but
impossible to answer on this forum.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

401k Loan Question here...

Example

I have a 10 year loan for 50k at 8% Lifetime Interest paid is about
21k (This interest is tax deductable like a home equity loan).

I will borrow 50k on my 401k at 5% to payoff that 10 year, paid back
in 3 years. There's about 3k in interest in three years.

Assumptions:

a) I understand I lose the opportunity cost of 50k growth in the 401k
for 3 years.

b) I understand I save X amount of money in interest savings (3 years
vs 10 and 5% vs 8%).

c) I understand the risk of losing my job and having to payback the
50k to avoid early withdrawal penalties.

for my situation, I think b) outweighs a) and c).

Questions:

On the loan payback to my 401k (deducted from my paycheck), are these
payments tax free? Like a 401k contribution?
My guess is No, and I have to pay this back with post-tax dollars.

On top of the 401k loan payback, can I still contribute to my 401k?
This would be good because the employer does matching. If not, then
this is also lost money.

I know the above questions may depend on employer, but I was wondering
generally what would happen in that case.

Thanks for your input.

Vis