I checked my 401k balance and out of curiosity I clicked on the loan options. The int rate paid to yourself is 10%. I could take the max loan of $50k and guarantee my 401k (mostly Roth) a 10% return. I take the $50k and invest in VTI so I have the cash available to repay the loan if I separate employment. I guess I’m hedging that the market isn’t going to return 10% over the next few years. I know historically the market has been ~10%, but it seems silly to pass on a guaranteed 10% return.

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Please tell me you're joking. Read your post again. Where is the guaranteed 10% return coming from?

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Eh, OP is able to stuff an additional 10% into his 401k because OP is paying interest on the 401k loan to themselves. Plus OP can still put the principal of the loan into the market via a taxable brokerage account and still get equities exposure. Does that make sense?

Your understanding is very problematic...

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Several problems with your analysis. 1. You invested in VTI so you have cash available to pay loan? If you had the loan for a year, how would you payback if VTI investment is now 40 and you owe 55? 2. The guaranteed return is coming out of your pocket. You are paying the interest. All you are doing is transferring funds from one pocket to the other. That is not guaranteed returns. 3. Even if you get 10% on your VTI and pay back the 55k after a year, you would have made that same in your 401k without the loan. Plus you had to pay tax on the 5k gain on your VTI when you sold to pay back the loan.

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So you could have left the 50k in the IRA and made 10% and had 55 after a year. Instead you took the 50 out, made 5, paid tax on the 5 and have 55 back in the 401k. Seems worse to me. You paid tax on 5 that you never would have without taking the loan. Now if you take the loan right before you know the market is going crash, you may be on to something. I suspect you would not be able to time that though

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Never borrow from your 401k if you have the means to not do it!

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Wow, Sr. Mgr…going to be a partner in no time with that brain power.

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Not to rain on your parade, but I have seen a lot of partners who have zero idea about profitability. They are fantastic at relationship development, but abdolute duds in pricing and engagement to make money. They do just fine with directors who know their shit on pricing working for them :)))

Scariest part is this guy works in finance ? I think assurance is audit?

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Since no one else is stating the obvious, that 10% "growth" from interest is paid by you from your net income. As a proponent of 401k loans in a pinch, I would never take one at 10%. When they were sub 4%? Absolutely.

Is this in a Roth account? If it’s not I don’t understand why you’d care to get more in it? There’s no deduction for interest paid on 401k loans.

Edit: this is in addition to what others have said that if market returns are higher… you’re also going to have less in the account so you’re effectively market timing a tax arbitrage (if there even is one).

Most companies will also not match your contributions while you repay the loan. So factor in the lost match as part of the cost to take out a 401k loan.

Yeah that would be a definite no then

Lmaoooo go for it dude. See what happens! Don’t mind the naysayers here

SA1 is right. We are all playing checkers. You are playing 3d chess.

Is this satire?

I see people borrow all the time. Keep those dollars working for you. if you're borrowing pre tax dollars, you're more than likely repaying with post tax dollars (first tax). When you withdraw the money for retirement you're paying tax again (second tax). Even if your contributions are Roth, the employer match is most likely pre tax.

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