Hi All,
I've done some research on 401k loans but no one seems to mention the possibility for someone like me whose employer matches 50% up to the federal maximum (eg you contribute 18k and they match 9k).
Here is my current situation: Age 24: Over the last 18 months I've contributed ~24k and have received ~12k in match. Current 401k Balance: ~38k
Current debt: ~4k
- Debt is on 0% APR credit card until September then 18.9%)
My monthly expenses are just about equal to my monthly take home pay (after 401k contributions). I usually end up with plus or minus ~$50 a month.
I've neglected my debt as I'm not completely matching my 401k which seems like a better investment decision given the 50% return compared to 18.9% interest on my credit card.
I can currently take a loan out up to 50% of my 401k balance at a rate of 5.75%.
Lets say I take 12k out.
4k payoff to debt 8k increase to 2017 contributions
I'm on track to contribute ~10k this year meaning I'm already making contributions of ~$833/month with the 8k increase I'm now making contributions of 1,500 a month so I would pay off the loan in 9 months or 6 months if employer match counts towards the payoff (I'm not sure if it counts or not?)
In theory by year end, this would:
- Pay off my debt
- Contribute roughly the same amount to 401k by year end as I would if I continued my contributions and didn't pay my credit card debt off.
- Would this reduce my taxable income? (probably not since year end contributions end up roughly the same?)
This all seems too good, what am I missing?
Does Employer Match not count towards the payoff? Do I not get employer match on funds that are used to repay the loan?
Submitted February 19, 2017 at 08:28AM by PF_Murr http://ift.tt/2kMKvK3
