Reasons Not to Borrow against 401k are wrong

by Richard A
(Charlotte NC)

I read articles about the "5" or "8" reasons not to borrow against a 401k and am not convinced that most are valid. They authors assume you are a stupid ignoramus that is wildly in debt and needs big brother to help you with your finances.

1 - your company may not allow you to continue to make contributions - of course, you should not borrow - especially if the company makes matching contributions. However, I expect that this a a minority of companies.

2 - you won't be able to pay the loan and still make contributions - again, if you can't do both don't borrow! duh!

3 - you're losing money since the loan can't "grow"! Well, the money is growing at the interest rate you are paying yourself. Has any of these idiots looked at the stock market return over the last ten years?? Not very good

4 - you are paying taxes twice - no more then you are paying any loan with after tax dollars

Many of the people borrowing from 401k's do so for the wrong reason. But if you use it to invest in rental properties, it makes a lot of sense