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Great read! Lots of potent talking points for your next financial meeting at work. I saw a company advisor get all bent because so many people were taking out

Great read! Lots of potent talking points for your next financial meeting at work. I saw a company advisor get all bent because so many people were taking out 401k loans. So we had to listen to him (a millionaire) and the CEO (also a millionaire) talk about how "cheap" money is at the moment and how they're both taking out mortgages and investing the money because their mortgage rates are so low. Then my boss said, verbatim, "I know, for a fact, with what you're making that any of you could get a loan at a credit union right now." There's a lot of older people in my industry who take an executives word for gospel. It was heartbreaking to see this man gaslight everybody with his unwitting ignorance to how real people get by.

crushingcrash 7y ago
I love how out of touch this puts upper management. People taking out fucking 401K loans should make a great leader go - "why are my employees in such dire financial straits?" I say - off with their heads. The revolution is coming.
perl4ever 7y ago
Do you in fact know anyone who has taken a 401k loan? Right now, I can't get a mortgage loan from a bank, but then again, I don't have a 401k either. I'm not sure of what scenario would make me do it if I did have a 401k.
- zelon88 7y ago
  There was one guy who shared his experience. He said he has high risk investments and was worried about the market. When things stabilized he put the money back. Another shared that he used it for home repair. Another bought a car. The downside seem to be 1) high fees 2) that money isn't making interest 3) you wind up paying tax on it when you pay the loan back with your regular pay.
  - perl4ever 7y ago
    I don't know. When I had the option of taking a 401k loan, my impression was it was a thing that had no reason to exist, much like an HSA. It's all a net loss to society to set up these games with rules for avoiding taxes that bait people into making decisions that cause problems later on.
    - zelon88 7y ago
      I think the only time it truly makes sense is when your credit is so bad you can't take out another line of credit, assuming you can afford to pay it back. The only pro that I could see to it was that it doesn't require a credit check. You're borrowing your own money. However, this is far outweighed by the fact that if you leave the company the balance is due immediately. So if you borrow $10k and get fired with a $5k balance you will immediately owe your company $5k.
- cannonedhamster 7y ago
  We did. It was the lowest cost loan we could get and the original value kept growing. It was basically just like getting a loan from the company in our case at zero percent interest. Not sure everyone gets those same benefits.
isoskeles 7y ago
401k loans are not a great idea in general. Are you saying that only "real" people take out 401k and other creative types of loans and only not "real" people (millionaires? I guess?) can qualify for better loans? I'm not sure I understand.
- zelon88 7y ago
  No, I'm saying it's apples and oranges for a CEO and financial planner to group employees together who make 10% as much just to beam about how cheap financing is and how anyone with half a mind is going to keep their mortgage because the market for money is so cheap blah blah blah. We make 10% of this guy's salary. Comparing his apple to our orange is going to disenfranchise people.
  - isoskeles 7y ago
    It's not apples and oranges, the price of money has been at historic lows for a while now. You might even have a better credit score than him and qualify for a lower rate (although not as much principal). Also, even if your CEO makes 10x as much as you, that still might not be so bad and not qualify you to talk like you're being victimized by someone conceptually talking about how interest rates are low. Supposing he makes $2M per year, sounds like you'd be doing fine.
- joncrane 7y ago
  Can't you do it once for home purchase? You basically borrow from yourself in order to buy a house? Instead of paying a mortgage, you slowly redeposit the money back into your 401(k).
  - isoskeles 7y ago
    At most for $50k, so it would need to be a very cheap house. You can't borrow more than $50k or half of your 401k assets, whichever is lower. You could take out for your down payment to avoid PMI, although I don't think that's what was being discussed in the example. (It wasn't worded so clearly to me though.)
sixtypoundhound 7y ago
Dear God, please tell me that wasn't for company stock... So if the shit hits the fan, you'll get canned AND wipe your savings out at the very moment you need it most... Never leverage up to buy equity in a business you don't control. When things turn, they turn fast. Source: My last company is basically going out of business.

crushingcrash 7y ago

I love how out of touch this puts upper management. People taking out fucking 401K loans should make a great leader go - "why are my employees in such dire financial straits?" I say - off with their heads. The revolution is coming.

perl4ever 7y ago

Do you in fact know anyone who has taken a 401k loan? Right now, I can't get a mortgage loan from a bank, but then again, I don't have a 401k either. I'm not sure of what scenario would make me do it if I did have a 401k.

zelon88 7y ago
There was one guy who shared his experience. He said he has high risk investments and was worried about the market. When things stabilized he put the money back. Another shared that he used it for home repair. Another bought a car. The downside seem to be 1) high fees 2) that money isn't making interest 3) you wind up paying tax on it when you pay the loan back with your regular pay.
- perl4ever 7y ago
  I don't know. When I had the option of taking a 401k loan, my impression was it was a thing that had no reason to exist, much like an HSA. It's all a net loss to society to set up these games with rules for avoiding taxes that bait people into making decisions that cause problems later on.
  - zelon88 7y ago
    I think the only time it truly makes sense is when your credit is so bad you can't take out another line of credit, assuming you can afford to pay it back. The only pro that I could see to it was that it doesn't require a credit check. You're borrowing your own money. However, this is far outweighed by the fact that if you leave the company the balance is due immediately. So if you borrow $10k and get fired with a $5k balance you will immediately owe your company $5k.
cannonedhamster 7y ago
We did. It was the lowest cost loan we could get and the original value kept growing. It was basically just like getting a loan from the company in our case at zero percent interest. Not sure everyone gets those same benefits.

isoskeles 7y ago

401k loans are not a great idea in general. Are you saying that only "real" people take out 401k and other creative types of loans and only not "real" people (millionaires? I guess?) can qualify for better loans? I'm not sure I understand.

zelon88 7y ago
No, I'm saying it's apples and oranges for a CEO and financial planner to group employees together who make 10% as much just to beam about how cheap financing is and how anyone with half a mind is going to keep their mortgage because the market for money is so cheap blah blah blah. We make 10% of this guy's salary. Comparing his apple to our orange is going to disenfranchise people.
- isoskeles 7y ago
  It's not apples and oranges, the price of money has been at historic lows for a while now. You might even have a better credit score than him and qualify for a lower rate (although not as much principal). Also, even if your CEO makes 10x as much as you, that still might not be so bad and not qualify you to talk like you're being victimized by someone conceptually talking about how interest rates are low. Supposing he makes $2M per year, sounds like you'd be doing fine.
joncrane 7y ago
Can't you do it once for home purchase? You basically borrow from yourself in order to buy a house? Instead of paying a mortgage, you slowly redeposit the money back into your 401(k).
- isoskeles 7y ago
  At most for $50k, so it would need to be a very cheap house. You can't borrow more than $50k or half of your 401k assets, whichever is lower. You could take out for your down payment to avoid PMI, although I don't think that's what was being discussed in the example. (It wasn't worded so clearly to me though.)

sixtypoundhound 7y ago

Dear God, please tell me that wasn't for company stock... So if the shit hits the fan, you'll get canned AND wipe your savings out at the very moment you need it most... Never leverage up to buy equity in a business you don't control. When things turn, they turn fast. Source: My last company is basically going out of business.