Need some advice - have a 401K loan that I took out to consolidate some of my wife’s high interest debt that she had from before we go married (long story, somewhat desperate situation that cont.....

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I’m in the exact same boat.
I took out a loan where market took a dip early 2018. (It took a few days for Fidelity to process and it just so happens the loan effective date fell on the day when market saw the lowest).
Contemplating paying off the loan but worrying I could become the biggest fool who ‘sold’ at the lowest and ‘bought’ at the highest.
But getting back to the question... I could’ve paid back in early 2019. If I had done that, I would have made up the loss and even more. So timing the market is rarely a successful thing. Since 401k is for super long term, I’d say pay it off as soon as you can. Even though it’s a loan to yourself, it’s still a loan, and it reduces your paycheck.
As for the market... I think we got equal chance of a recession and a ‘bubble’... depending on lots of factors... and nobody knows what it will be. Or it could be a slow-cooked bull market all the way till something really bad or good happens.
Good luck!

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You really shouldn’t try to time the market. Tomorrow, the market could go up. Or it could go down... no one knows. 3.5% interest is pretty low, but I’d try and pay it off soon as you can.


A good example of why you shouldn’t try to time things: since 2016, there have been doomsdayers saying a recession is “right around the corner”. If you would have listened to these people you would’ve missed out on almost half of the largest/longest bull market in American history.

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she couldn’t avoid). Given where the market is at, should I go ahead and just pay it off or continue making the monthly contributions since the interest is going back to myself? I don’t want to “buy in” high if the market is going to shit when I could have stayed liquid in case things go south with the economy

We’re talking $15K, interest is at 3.5%

That’s fair, and all of my other investing strategies are via dollar cost averaging. Main reason I was asking for this situation is because it would be a larger spot buy, and I do believe there are more warning signs now than in years prior (softening earnings, things I’m seeing in my own firm, wealthy investors turning more timid, slowing auto sales, etc.) hence wanted to ask folks opinions

Plus there’s always the option to just leave the loan open and stay liquid to minimize risk of job loss, etc.

Sure. I would admit that the data has been weaker lately and agree that there are some warning signs out there. But we don’t know when a recession may happen, how long it will last, and what the impact will be on equity markets. E.g. we could hit recession a year from now and it’s entirely possible it’s a short recession and the bottom doesn’t touch where we’re at now. So you could be waiting just to ultimately buy in at a higher price. Point is, there’s so much randomness built into it, better off just being in the market as long as possible.

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