Just found out the wife ran up some serious credit card debt

I've seen a lot of high-horsing and finger-pointing in this thread, but I haven't yet seen the simplest, IMNSHO, the best solution. Assuming that you have a 401k with enough assets to borrow enough from it to pay off the debt. And, crucially, you are absolutely 100% unquestionably certain that the 401k holder WILL NOT be downsized, laid-off, made redundant, or any other sillyspeak euphemism for getting shitcanned.

Ask your HR people to give you the details, but basically you borrow up to 50k, you pay yourself interest, and the 'catch' is that the balance of the loan is not participating in the market.

If, however, you are shitcanned, the full balance is due and you are unemployed.

 

I don't believe this last part is necessarily true, at least not in all cases. I took a small loan out against mine years ago to fix my fuckup that I referenced previously in this thread. I then left my employer to go to another job and was allowed to continue paying at the same rate that I had previously. I just had to manually pay since it couldn't come directly out of my check every month.

Otherwise, I agree with you. In retrospect, I hated doing it because the interest I repaid did not compare to the growth that money would have experienced otherwise. And the interest was my own money as opposed to growth with someone else's. That said, it was still probably the best of my bad options at that time. Currently, no brainer. None of our 401ks are doing shit right now anyways so the interest probably outperforms any potential growth or maybe even offsets some losses. Now that I think about it, I may be well served to take out a "loan" on my current 401k and just let it sit/repay it with the same money. I'd probably lose less in the long run.

 

A couple of years ago when I rebalanced our allocations, we decided to pull out the full 50k and pay off the 4runner. So far that's been a pretty dang good idea.

The HR dude was pretty adamant about the due in full upon termination concept. But then, he was a wannabe CFP who kept insisting it was a terrible idea to pull that money from the market.

 

He may have been completely correct. It's employer and plan driven. Some require immediate repayment upon separation, and some will allow you to set up direct payment and maintain the loan.

 

What can they do to you, if you aren't flush with cash, and they downsize you?

 

buttstuff

 

ATOGM.

G = Guy.

 

It may have changed, but what they do is consider it a withdrawal and then you pay a 10% penalty on that money as well as income taxes on all of it.

 

So, they take more of what you don't have.

Some shrewd people have taken loans when the market was high, and paid them back after the market tanked a bit. Paid yourself back, with interest, as well as getting the gains when the stocks recover.

 

Doesn't sound inviting to me. But(t) that's just me.

 

Everyone thought I was nuts for pulling all my 401k, and pension out during covid, after the govt removed the penalties... who is laughing now. my pension and 401 are still worth what they were before the last HUGE CORRECTION in the market. glad I did. Ski

 

Except for that 9% “fiat” tax…

 

I saw this, I think it was up to 100k, no penalty, 10% tax and you can spread over 3 years on income tax.

 

? what?

we were always going to have to pay tax, whenever you pulled it. there was no way around that but, all the penalties were removed. and yes @TWF2 we could have spread it over 3 years but, we just bit the bullet. buy once, cry once. now I have the liquid money, and can "control it" myself. Ski

 

But that liquid money is worth 9% less than it was worth a year ago.

Better than absorbing that hit plus the devaluation of stock assets, don’t get me wrong, but unless your liquid money grew by 9%, you’re further behind than you were when you pulled it.

 

Is this the new math they have been telling us about? you say "better than absorbing that hit, plus devaluation of stocks assets". then say I am further behind. so in your scenario, I would be down the market hit devaluing my portfolio, and the inflation loss of dollar power.

I pulled mine before the tank, when my 401 and pension were at their highest, and only lost the inflation loss of the dollar. in my thoughts unless you pulled it, everyone else but, the richest of the rich, shorting everything, lost. and most average everyday people LOST A LOT! I am a retirement age, or close to retirement age person, not touching what I pulled, so far. so... Ski

 

Just illustratively from the screenshots below, markets are up significantly higher than they were pre-pandemic. So I'm not really tracking with this line of thinking.

 

I know about fuckall about the markets. And don’t want to turn this into any kind of political debate. But I can tell you my accounts are all down 15%-20%. It was closer to 30% but they seem to have recovered to some degree in recent months. But still not even level to where they were 2-3 years ago. And these are multiple accounts across different investment firms.

 

Peak of the market was 37000. We aren't back to that yet. March of 2022.

 

Ahh, I misread his post. I now see that he's saying he pulled his money out at the top of the market before the last ~10% correction (I originally read it as saying he pulled his money out pre-pandemic).

In that case, bully for him. I'm jealous and wish I could time the market that well *shrug emoji*.