Re: Scary article on retirement planning.

On Wed, 3 Dec 2003 20:40:55 +0000 (UTC), [EMAIL PROTECTED] (Marc
VanHeyningen) wrote:

>Thus said JC Dill <[EMAIL PROTECTED]>:
>>If you want a *really sweet* deal, get your retirement fund setup
>>somewhere  where you can borrow money from the fund, and pay it back
>>with interest.  Then take a loan from the retirement fun to help buy a
>>house.  Now when you pay interest on your homeloan, you pay it to
>>yourself!
>
>However, you pay the interest with after-tax dollars, but you get
>taxed on that money again when you withdraw it. 

You also pay mortgage interest with after-tax dollars.
At tax time some or all of that mortgage interest can be written off
as income subject to taxation.
Not so with the 401k interest paid to yourself.
That's the only difference in tax consequences.
It might be a chunk of change, or might not be.

>Also you lose out on
>whatever other investment gains that money would have made,

Or losses suffered.  That's a question of personal psychology.
A sure thing by eliminating mortgage interest costs and increasing
home equity, or swimming with the sharks in the Wall Street cesspool,
angling for scraps.
Since even Money Market funds can go negative, 401k funds
moved to home equity are protected from loss.

>and if you
>change jobs you'll find that loan is typically immediately due and
>payable in full.
>
Your most important point.  I won't take a larger 401k loan than my
home equity line.  Even then there are bleak interest rate scenarios,
so a cautious person will keep 401k loans short term - I won't go
beyond 24 months.  

>Borrowing from your retirement account is generally not a good idea.

Depends entirely on psychology.
IOW, what do you see in your crystal ball? 

--Vic