401k withdrawal to payoff home?

Microsoft codeflow
Feb 3 21 Comments

have $200k cash, and $250k in 401k, loan balance $400k. currently renting the home positive income around $300. I am in mid 30.

Interest 4%
401k is managed last year performance with the recent market issue -8%, worry that there will be big dump soon.

what do you think?

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TOP 21 Comments
  • Oracle frustrat
    What a stupid idea.
    Feb 30
  • Verizon / EngIWorkAtFB
    No fool.
    Feb 30
  • Microsoft BcrX06
    What? You're thinking about withdrawing from a 401(k) to pay down a mortgage? Why? Didn't you go for fixed rate? Could've locked in a ridiculously low rate.
    Feb 32
    • Microsoft codeflow
      OP
      yes it is fixed 4%, I feel they are losing value and the market may have big dump soon.
      Feb 3
    • Microsoft BcrX06
      No reason to pay off that loan early. Just keep cash in your 401(k) if you think the market will go down.
      Feb 3
  • Walmart.com ToKL28
    What's the interest on the loan?
    Feb 32
    • Microsoft codeflow
      OP
      4% updated the post.
      Feb 3
    • Walmart.com ToKL28
      Absolutely not. I would not pay off the mortgage even if I had full cash on hand
      Feb 3
  • Microsoft oroC00
    What is the interest on 401k loan? If it is the same as your mortgage rate, then converting half of 401k to cash and borrowing against it makes more sense than taking out that amount from bank. After all your 401k loan payoff interest goes back to your account and not to bank
    Feb 33
    • Microsoft BcrX06
      @oroC00 401(k) loan isn't tax deductible though.

      This is a very silly idea.
      Feb 3
    • Microsoft oroC00
      You can deduct tax only on interest paid. Having zero interest still beats any deduction. The only issue is limitations on 401k loans and payoff schedule
      Feb 3
    • Microsoft BcrX06
      Not really. 4% interest is basically free money. Any long term investment should beat that.
      Feb 4
  • Salesforce hfgnntunv
    Pay off mortgage - great idea
    Use 401k to do so - are you nuts?
    Leave your 401k alone or even better just forget it exists when you thinking about assets you have.
    Feb 31
    • Microsoft oroC00
      Forgetting about 401k is a bad idea)) Market can nose dive bad and you can lose your investments (assuming it is in stocks or stock funds). This could happen right before you need to start withdrawing from it, nobody is insured against market crashes. There is also a risk of nationalization of 401k in future. This possibility is not so remote considering ideas of extreme democratic left to bail out SS before it goes into deficit. No need to panic now but be prepared to act at some point.
      Feb 3
  • Verizon G.Jetson
    You can usually only borrow half of the 401k anyway. Don't do it.
    Feb 31
    • Uber / Engp3
      It’s a withdrawal, not a loan.
      Feb 4
  • Broadcom Ltd. TmHR54
    401k loan max is 50k. Check ur before thinking about this.
    Feb 30
  • Apple / EngApple Park
    Withdrawal from 401(k) and you take a ~50% tax hit. You don’t have as much money as you think. Bad idea overall though.
    Feb 30
  • Tumblr Olajuwo
    Why are people so stupid?
    Feb 30
  • The consequences for withdrawing your 401k early should prevent you from doing something so dumb.
    Feb 30
  • Amazon / Engtylium
    Your 401k is outperforming your loan interest. Why even consider doing that?
    Feb 30

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