BeaForoni[at]msn.com wrote:
- quote -

Do not borrow against your 401K. Risks: loss of job; loss of spouse's
job; disability; death; spouse's death; missed payment, etc. You are
getting a tax break on your mortgage PAYMENTS and you are getting a tax
ADVANTAGE on your 401k GROWTH and CONTRIBUTIONS.
The comment above about being taxed twice should be taken to heart.
Don't get too clever with your 401k. It's your personal Social
Security. Invest with your head, not over it.

Good luck,
Dave

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote
- quote -

The 8% is paid back to himself. It does not bother me,
personally, in view of the other considerations so far
mentioned in this thread.

- quote -

You're right. I misread/misunderstood.

BeaForoni[at]msn.com wrote:
- quote -


As someone else mentioned one risk is the possibility of needing to
repay the whole loan if you leave your job or are let go. Check your
plan documents for rules on that.

One comment on the "pay yourself interest". I think this is better
phrased as "I can borow money from my 401k and pay it back while also
making additional contributions to the account, equal to x% of the
balance per year." There's an important difference...this "interest" is
just money out of your pocket. When you put money in the bank, you truly
earn interest -- it comes from someone else. If you hold a bond mutual
fund in your 401k, you're being paid interest by someone else. You see
growth in your bottom line because someone else is paying you for using
your money.

"Interest" paid on a 401k loan isn't like that, you're just shifting
money from your pocket into your 401k plan. No change in net worth,
though if you for some reason want to stuff a little more money into
your 401k plan, it's a way to do it.

The true cost of the 401k loan is the lost earnings/interest/gains that
would have happened if the money was left in the plan, and invested in
the mutual funds you've chosen. This is uncertain, of course, but if
your mortgage interest rate is low it's more likely to pay off.

The other issue is that by paying off the mortgage, the money becomes
illiquid. You'd have a fully paid off house but that much less cash
available. That may become a problem at retirement, it depends on your
overall assets and plans for selling the house down the line.

-Tad

Elle wrote:

- quote -

But OP will trade a (he never said mort interest rate) mortgage for an
8%+ 401 loan. I agree that today expected 10 year stock return is closer
to 8%, not 10%.
- quote -

5 years for this type of loan, 10 is for a new purchase.

- quote -

Why? OP said the interest on the mortgage wasn't significant. I read
that to mean the write-off was minimal compared to STD deduction, and/or
the absolute interest was low. The loan isn't taxable. His tax bill will
not shoot up.

- quote -

We still know nothing about the rest of OPs portfolio. This may be
advisable, or maybe OP needs to fund emergency account, or other savings
he can access. In general, you pay the mort early, that money is gone.
(When early payoff is appropriate, I usually suggest lining up a HELOC,
just to be available, in case.
JOE

- quote -

Not from 401K borrowing! Then you are taxed twice-
you replay with after tax money, and taxed again when withdraw.

It might make sense with other post tax savings if you mortgage
interest rate is low.

(Pro) Based on my reading, I am not as confident that we're
going to see 10% returns on the S&P 500 etc. in the near
future. I think the stock market is somewhat overvalued
right now. So I think there's more reason to consider paying
off one's home loan, assuming the mortgage rate is upwards
of say 5.5% or so. Whether to borrow from one's 401(k) to do
it is still questionable.

(Con) Doesn't 401(k) law require such a loan to be paid back
within five years? Google for {401(k) loan "five years"} for
support. I note that this is not a home purchase. If it were
the law says otherwise. The five-year limit would be
something else to factor into your decision-making, along
with what the others say.

(Con) Your tax bill for the year you borrow from the 401(k)
will shoot up, possibly quite a lot, depending on how much
you need to pay off the mortgage.

Do you contribute to your 401(k) beyond the matching? Maybe
strongly consider putting that excess towards higher monthly
payments on your mortgage.

thewiz wrote:

- quote -

Can you guarantee that?

Best regards,
Bob

BeaForoni[at]msn.com wrote:

- quote -

Keep in mind, you may only borrow 50% of the 401 balance up to $50K
(borrowed). The risk is that if you lose your job, the loan may not be
left outstanding. Not knowing the rates involved (Although my 401 shows
a loan rate of 8.75% right now) but trusting your mortgage is probably
lower than this, I'd say to do nothing at this point. If your mortgage
is above the current rates available, consider a no point, no closing
cost refinance. Fixed rates are still below 6% on a 15 year fixed.
JOE

BeaForoni[at]msn.com wrote:
- quote -


This is simple, you mortgage is less than 10%. The S+P pays more than
10% over the long run. Here is how you make money. You use OPM other
people's money. Take the 401k money invest wisely or just get a mutual
fund with a low management fee like VFINX, use the interest to lower
your taxable income. I would almost suggest just paying interest to
keep more money in the market.

The next few years the market is going to keep going up and compounding
your interest all this at a rate more than the rate of your mortgage
interest.

BeaForoni[at]msn.com wrote:
- quote -

This article has some useful pros and cons of taking a loan
against your 401(k). The biggest con that I see is that if
you terminate your employment or retire, you will have very
short notice to come up with a way to pay it back.
http://www.financialfinesse.com/spec...CB_2005-04.pdf

Anoop

BeaForoni[at]msn.com wrote:
- quote -

how much is in 401k?
how much is mortgage balance and APR?

how long do you have before retirement?
how many years do you have to pay off mortgage?
what would interest rate be on 401k loan?

Could you pay off the 401k loan in less than 5 years? If the 401k loan
is paid off quickly, I could see this making sense MAYBE, but I would
be hesitant to suggest it's a good idea in all cases.

I have taken 401k loans before, but I paid them back within 15 months
and the monthly payment was always quite high- to force me to realize I
need to get the money back into the 401k as quickly as possible.

If you paid off mortage with 401k loan
then paid off 401k loan in a short amount of time
what would you do with the money you had in your budget for the
mortgage payment and/or 401k loan? If you would SAVE this money, this
might be a good idea. If this money would be consumed/spent on
vacations, consumable goods or other discretionary purchases, I think
this is a bad idea.

BeaForoni[at]msn.com wrote:
- quote -

What is your mortgage interest rate? Do you get any tax deduction for
your mortgage interest?
I recommend you keep your 401k as-is, so you continue to
build for your future retirement. The full contents will continue to
grow tax-deferred.
Joe Weinstein

I have reached a point where my 401K is now greater than my mortgage.
My question is would there be any advantage to borrowing from the
retirement plan and paying off the mortgage completely? My thought is
that I would be paying myself the interest. At thispoint there is
little advantage to itemizing and deducting mortgage interest.

Thank you in advance.