Welcome to DU!
The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards.
Join the community:
Create a free account
Support DU (and get rid of ads!):
Become a Star Member
Latest Breaking News
Editorials & Other Articles
General Discussion
The DU Lounge
All Forums
Issue Forums
Culture Forums
Alliance Forums
Region Forums
Support Forums
Help & Search
The other downside can be paying taxes twice.
Think about this:
Let's say you've contributed $10,000 pre-tax to your 401(k) over the years. Now you take out a loan and borrow $5000 of that pre-tax money.
You pay back the loan over the next five years. But you have to pay it back through payroll deductions, and those deductions are made AFTER taxes. So, while you borrowed PRE-tax money, you have to pay it back with AFTER-tax money.
So, you pay back the $5,000 (plus interest). Then you get to retirement and you withdraw that $5000 again for your retirement income. What does the government do? They get to tax you again. They double dip you--and they can get away with it, because they're the government.
So don't borrow from your 401(k) unless you absolutely have to.