I have a friend obsessed with this idea, but I can’t seem to convince him that he would be better off saving a 3-6 month emergency fund. He doesn’t believe he would actually gain any more peace of mind compared to knowing he can just borrow from himself and pay himself the interest.
Thanks for the comment and the sub. Every situation is different. Don't bang your head against a brick wall. I'll never say having some money set aside in an emergency fund is a bad idea. While recently 4-5% in HYSA is a decent return on money you don't want to risk, for the past two decades 0-2% is not. Some combination of savings and access to a 401k loan can be a good combo. For lots of people, having money sitting idle at a bank, even if it's a HYSA, feels like underutilization. You can watch my video on emergency funds to see different options based on your age ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-rym_F9nnnVw.htmlsi=YKwIzOaRBAOV8tn7
@@seetheforestthroughthetrees I'm in that camp! I recently lost out on a room for rent because I argued with the potential roommate about keeping my deposit in a high yield account rather than whatever lousy bank he has down the street!
If you take a 401k during a bear market, would you actually make money? If the stock market is tanking but you already sold your assets and are paying them back with interest, wouldn’t a load be beneficial since the market isn’t growing?
Correct. In actuality, if you were able to time and forecast the market, if you took out a loan at the top and the stock market fell 20-30%, and then you paid the loan back in full, you would be back in with full exposure AFTER the market drop. You would have paid interest to yourself during the payback period as well. However, rather than "timing" a loan, it's best IMO to only use it in one of the scenarios I outline in the full video.
Great question. I explain it in full detail in my video 401k Loans Explained. You can check it out here.👉ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-3ZaKqHL-U_g.htmlsi=NebFj1IGHqc7wQjD
