Thank you for your advice. That helped a ton. Assuming that they let me I will be going through with the loan.
Is the 401k plan from your previous employer? I’d first check if your plan admin will let non-active employees take loans out.
It is from my previous employer, however the allowed loan amount is already based only off my vested balance. So I’m not sure why they wouldn’t. But I will ask.
Otherwise, if it helps your decision, the interest accrued from a 401k loan goes back into your own account, so it’s like you’re paying yourself interest.
That is excelent to know! Thank you. So it sounds like I’d effectively just be contributing a bit extra to my 401k for a few years. That does make all the difference in my decision.
The main pitfall would be making sure you can pay it back on the agreed upon schedule, otherwise you get penalized.
At less that $100 per month I shouldn’t have any issue making the payments. I could probably even make those payments on my old income after things got sorted out.
Also, while your money is removed from the market, you’re technically losing out on potential growth, but sounds like you’d benefit more from having access to the money now.
Honestly I’m not picturing the market being in the best shape for a bit anyways considering the current US political situation. But even so that’s a good point and with that in mind I’m going to try and pay it off as early as I can. I would definitely benifit from having the money now though.
Honestly, if it were me and it would set me up for a career and I probably would do it and just make sure to contribute as much as I can to my retirement once I’m able to.
That’s going to be my plan going forwards. It’ll be a few months before I get access to my new 401k plan but I always try to put as much in as I can. I figure I can always cut back on my contributions later if it starts looking like I will have plenty in there.
Some alternatives would be a credit card or retailer with a fixed fee pay-over-time feature or a 0% interest intro offer. Failing that, you may just to get creative (sell things, pick up some side gigs, etc.)
Unfortunately a fairly recent bankrupcy and my current credit score means I have basically no credit options other than my 401k right now. I also don’t really have anything I could sell. But I have been looking at side gigs. My old work schedule made those tricky but I can probably do some side gigs with the new job if I don’t wind up working too much overtime.
Taking a loan from my 401k is not something I would be considering if I had any other credit options available.
You can’t default on a loan you can’t take out in the first place.
The bills I’m refering to can’t be negotiated lower. I’m talking, mortgage, utilities, liability only car insurance, and medical debt which has already been negotiated as low as possible. Any dischargable debt was discharged a bit over year ago via bankruptcy (which is why I have no credit options), unfortunately a medical issue cropped up after that. My optional spending is already as low as I can get it and even necessary expenses have been delayed far longer than they should be. Mainly, I have some fairly critical issues with the house which I can’t afford to fix but only get worse and more expensive to fix every day. I can’t even rent out part of the house for extra money due to those issues and the rental restrictions in my city.
Trust me, I absolutely know I should leave my 401k alone, if I had any other options to get money I would be pursuing them. Right now though I need a fair chunk of money basically immediately and my only options are:
Fall further behind on bills so I can buy the tools I need and plan to catch up later. My creditors won’t be happy and the bank may threaten forclosure again. But I can do that and it shouldn’t be an issue outside of the short term and delaying the recovery of my credit score a bit and delaying when I can start getting an emergency fund together.
Borrow money from my 401k. This has the various pitfalls you brought up but it would get me caught up and able to start building an emergency fund more quickly than option 1 which would save me money in the long term which would allow me to make higher contributions to my new 401k sooner.
This one is an even worse idea but it is an option I just recently found out about so I’m listing it. Roll my current roth 401k (I probably should have mentioned all my contributions are roth) into a roth IRA and then withdraw enough off the principal to cover immediate expenses. The literal only reason I’m even entertaining this idea is because not having to make loan repayments would enable me to start building an emergency fund immediately and having an emergency fund would save me money in the long run which would allow me to contribute more to my new roth 401k even sooner.
Remain behind on my bills by the current amount and just use option 2 or 3 to cover the cost of the tools. Then plan to catch up later.
Right now I’m mainly just torn on which way to go because option 1 costs me the least on paper. But at the same time being broke is costing me more money right now. The question is if I could use that money from my 401k (in one way or another) to start getting ahead of things now would it save me enough to eventually counteract my losses on my 401k. Considering I’m not really anticipating any gains (I’m pretty sure we’re all expecting a crash any day now) on my 401k in the near short term anyways I may be able to make better use of that money to increase my earning and saving potential now so I can make larger contributions while the market is recovering.