So funny how studios have changed and how these three brilliant careers have taken off. I applaud the three of you for doing the great work that you do and keeping doing!
It worked out for you because you stuck with your company for that long. If you had switched employers or got laid off, Uncle Sam would have reclassified it as an early distribution and you would have had to pay taxes and penalties on it. I'm a tax accountant and had it happen to one of my clients, he ended up owing $25k in taxes and penalties on a $50k loan. Also the interest you paid yourself is probably less than what you would have earned if that money was sitting in a growth fund.
Job Done Right I've did the homework. 401ks are not worth it to me. If you really look at the numbers and how a 401k works you'll find out that you wont be able to live off that money very long when you retire. Just think of what what uncle Sam will do to your money when you begin to get distributions when you retire. It's scary if you think about it. And for goodness sake please don't let another recession happen. SMH
took out a loan from my 401k for an emergency, but i knew i was receiving my bi-annual bonus soon. I took it out the loan and paid back myself with interest with the bonus money. Sometimes you do what you have to do to survive. This wasn't done to purchase something stupid either.
The company i work 4 if u take out loans from your 401k and u get fired or lose your job u can still continue to make payments on your 401k loan in order for it to not to default and u be charged that penalty so this is not true for all companies
I think you have to really look at each situation and make a best choice of each person. Opportunity costs are different for people so it varies. You just have to really know what you are getting yourself into
+bludmakesgrassgrow you only lose money when you pull it out. You only get hurt when you jump off the roller coaster :D. It is okay to buy low and in the future sell high, but it is never okay to buy HIGH and sell LOW. I hope this helps.
Matthew Lucas I decided to reduce it to 3% and use the extra income to clear up my remaining debt. Should be debt free by June, then I'll ramp it back up.
manuel Gutierrez right!!!! the best time to put money is when your money is down. you buying shares at a cheaper price. its called "dollar cost average"
It means you need to pick better investments. If you are losing money in a bull market, look at the funds you are investing in and pick better ones. If you don't have any good fund options available, then only put enough in to get the company match and put the rest of your retirement $ into an IRA
I took 10% loan out of my 401k and 5X my money immediately by a partnership to buy a percentage of a 5 million dollar commercial property. Sometimes I don't think Dave's platform is giving sound advice. Life is a Risk. Your freaking job is a risk, investing in a 401k is a risk. Those who don't take risk don't reap the rewards. I want to enjoy some of the fruits of my labor today not when I'm too old to enjoy it. Real estate is ALWAYS good debt. If u have any debt have it in real estate. Always looks good in a portfolio and Balance sheet!! I'd rather owe myself than a bank!!
Ramsey and his team rarely ever give good advice. Glad you listened to this with some sense and came to this conclusion. I feel pretty bad for all of his viewers who follow him blindly.
Its only bad if you take the loan to spend the money. I just took a loan from my 401k to buy three rental properties for $58k but the value on the properties is around $110k. Why hope and pray for compound interest when I can get instant equity instant appreciation and a much greater cash on cash return then the stock market.
Derrick Wilson thats not how real estate work. you got lucky the properties increased in value, and thats all. you took a gamble, and if you lost that gamble, youd be one of many broke people.
Matteo Bassini I didn't get lucky buddy thru hard work I found a seller who wanted out the business and sold his properties under value. Lotto winner's are lucky, and trust me I know exactly how real estate work!!!!
They need to do a better job explaining their points. If she tells her husband about compounding interest and job security, it’s going to be easy for him to explain in his own mind those risks away. One, prove compounding interest is going to work for them if they plan on paying back early? Two, some people have jobs that might be pretty secure. Should they? No. They can knock out $26k pretty quick. If they are watching their 401k lose money as they are investing, it might be best to explain way they should stick it out. Or stop contributing at snowball the mortgage
What if you take the loan and invest it into something else that makes you a higher interest rate back per year than it would have in the 401k compounding?
Lol, Luck? ...I don't believe in Luck... I believe in math, science, hardwork and caluculated risk. I HAVE invested 401K monies into something else and got a return. I have taken 10K from a 401k invested it into a property (along with another 20-25K from my cash[and this also includes the downpayment+fees]) I purchased for 128K in an area that was appreciating in value. 3 years later that property went for 221K. Yes, you heard me 221K. So, no I do not and will not believe in luck. My 401K's compounding interest couldn't keep up with that return within that short amount of time if it tried....oh, and I lived in this property for that 3 years. Yeah, it was a risk, but if you don't want to take (calculated) risk then you should forget about making real money until your like 70 year's old... I can't wait that long...oh and one more thing... I suspect that it could have sold for around 200-220 within 2 years had I finished the updates a year or so faster....
You still have to payout in taxes 35-45% there are much cheaper loans out there then that, if you have such an awesome idea investors aren’t hard to come by
I’m thinking about making a large payment on mortgage at end of year that will apply towards principal. I’m doing this so that I will pay off my 30 year mortgage in 20 years which will safe me thousands in interest. Knowing this, I would like to know if it’s wise to take out a loan from my 401k that is equal to my employer match and pay it back within 3-6 months with a mandatory 6% interest for taking out said loan. I can’t see why this would be a bad idea? I’m using employer money to pay off loan..
Im sure its already done, but you should refinance if taking out a 401k loans going to save you money on a mortgage. Unless you're older than 59.5, this is not a good idea.
They're already in debt if they owe the money on that land, why not pay it off with the 401k? The market might crash anyways and they'll lose that 401k money
It's funny how they talk about compound interest. But they want everyone to pay off their mortgage early and then the money just sits in your house and gains no interest. You just hope your house goes up in value. Instead pay your 3.5% interest rate mortgage normally. Then increase your 401k weekly deferral the same amount as what a double mortgage payment would be. A couple can save 39k total. 19.5k in each individuals 401k..If your 50 or older..it's 26k. Let's say you're a couple under 50 years old and they make 150k a year total. You save 39k a year for five years. That's 195k in five years..Let's say you had 100k (50k each)in your 401k at the start..So in five years..That 100k is now...drum roll please...295k. That doesn't include interest. We'll use 6% on an average amount of 170k per year..That's another 50k in interest..so now you have 345k...What would you rather have. A paid off mortgage in five years or 345k which keeps making money every year forever. What does a paid off house make you. Some years, ZERO!!! Not even close what that 401k will be in ten years. Those years you make 20% in your 401k..WOW!!! 20% on 345k is 69,000 dollars..Holy Macral!!! Don't pay your house off early people. Instead double, triple, quadruple your 401k deferral instead. if you want to be a little safer in case of a market crash. Put 20% in the stable account and use that to buy if the market crashes 20% for what ever reason. That will bring your break even point lower. Then when it rebounds..move back that 20% for the next pull back.
Husband took a 401k loan. He left his job and is paying the loan back. There haven't been any IRS fees, penalties, etc. We needed a newer (used car) because we need a car where we live because of no public transportation and nothing within walking distance. Best loan ever and nice to have a car we didn't need to keep dumping money in to keep it running.
Never take a loan from 401k. A fee and interest from pretax money. You lose compound interest, gains and you pay back with after tax money. It’s not a cheap loan! Then when you retire you get to pay taxes on the money again!
My husband took a loan for his 401k an pay all our credit card debts , I knew it hasn't a good idea since the beginning but at that point he was really desperate for our bad financial situation 😞😞
Job Done Right thank you for responding that's what my husband thought, I think it's a bad idea long term because the compound interest you lose make in your 401k 😞
...the compound interest may not outperform the saving you made by paying the cards off. Plus, you could take the payments you usually paid towards the credit card and tack in on top of the payments you make back to your 401k to pay it back even faster.
I've had 2 loans from my 401k. I live in Arizona my house needed a new air conditioner the brand I wanted was 9000 bucks. I went to my credit union. They ask do I want to get a 2nd mortgage on my house, I say no. Do I want to put up my paid for vehicles as collateral, I say no. Ok we can give you an unsecured signature loan at 13.5 percent. I say I'll get back to you. I end up taking a 12000 dollar loan for 3 percent for 3 years. I owed visa 3 grand at 9.5 percent. So got a new a/c and paid off my credit card. cost me about 160 bucks every 2 weeks included interest. That I paid to myself instead of the credit union and visa. Was I wrong?
having a 401k is a terrible idea. Debt can be a great thing as long as you are using it as leverage. For example investing in real estate specifically apartments
vsonic86 I started my 401k in 1986. The Dow was about 1000. The maximum contribution back then was $4k I think. Just kept contributing. Also soon as self direct was available I transferred 90% bought shares in companies like Apple,Amazon,Netflix,and others back when they were under $5/share. Also a lot of Exxon in the late 90s And when the Roth 401k option began I put 100% into it from then on. Once the maximum crossed $10k I just stayed with that amount each year until 2006 then began maximum contributions. Also went to 50% cash when market gets to a certain level and wait for a recession or black swan event then buy in at lows.
