Sell stocks or take loan from 401k?

Salesforce / Other 444444
May 28, 2018 32 Comments

If you need some money (say $50k) for 3-4 months, would you take loan from 401k or sell stocks?
I don’t want to pay tax on the gains from selling stocks. I am not sure which option is better....

P.s. I need to lend that amount to my brother and I’ll get it back in 3-4 months.

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TOP 32 Comments
  • Microsoft / Eng golumber
    I would take loan from 401k since you can contribute later in catchup contributions.
    May 28, 2018 11
    • New AMex31
      Ok
      May 28, 2018
    • Oracle / Eng ClouDev
      Fidelity allows to take a loan against your 401K, rates were around 5% last time I checked ( a few years ago).
      May 28, 2018
    • New / Eng
      Luffy, M.D

      New Eng

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      Luffy, M.Dmore
      It's a per employer thing, not specific to Fidelity. Most big tech employers allow it.
      May 28, 2018
    • Visa shaolin
      Yes 5.5 now
      May 28, 2018
    • Microsoft IronSlug
      I took a loan against my 401k recently for a down payment. No penalty at all. I pay 5% interest rate to myself and I have 15 years to pay it back. You can only withdraw 50% of your 401k, up to $50k. Only down side is you pay it back using after tax money (obviously, since the money was used for a down payment, which is not tax exempt). Also, if you leave msft, you have a few weeks to make arrangements to setup auto payments to continue paying it using the same terms.
      May 28, 2018
  • Amazon Tfgbfd
    I think you're better off just selling the stocks and planning on this being a gift instead of a loan. Treat it as a lucky surprise if he actually pays you back.
    May 28, 2018 2
    • Salesforce / Other 444444
      OP
      Ha. You are so right!
      Actually my dad’s going to give me the money on his behalf, so I know I’ll get it back.
      May 28, 2018
    • Microsoft ($)^(&)
      Even if you get it back it probably will not be in 3-4 months. I loaned my brother 40K almost 2 years ago and it was supposed to be paid back in 6 months. Only seen 30K so far. I don’t want to ask since family means more for me than money.
      May 28, 2018
  • Apple tuolumne
    A very important financial rule: thou shall not loan money to friends or family. Gifts are fine.

    Even this does work out, they’ll come back and ask for more money. And you don’t want to be viewed as a bank.

    Just my $0.02.
    May 28, 2018 1
    • New / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      This. My brothers could pretty much ask me for as much cash as they need, but either I can afford it as a gift or I can't. They never ask. Occasionally I offer, since they're underemployed do-gooders.

      Never loan money unless there is a legal contract involved and there is no personal relationship to be ruined if you have to enforce the terms of the contract.
      May 28, 2018
  • Facebook EvhB65
    Get a margin loan against your shares. But only do this if you have way more in your stock portfolio compared to the amount of the loan. This way you stay invested.
    May 28, 2018 1
    • Facebook EvhB65
      Also, if you write down the repayment plan with your brother and charge market interest rate, you can then deduct the interest of the margin loan against your income. If you don’t want to charge market interest rate to your brother, just gift it to him.
      May 28, 2018
  • Apple metafor
    I have my RSU shares transferred to interactive brokers. Their margin rates are way lower than E*TRADE (Libor+0-1% depending on how much you borrow). Margin loan that and pay ~3% interest for the amount of time you need
    May 28, 2018 0
  • Salesforce Go ogle
    You can get a teaser 0% cash transfer from credit cards. It'll take about 3% to process.
    May 28, 2018 0
  • Microsoft h1bitch
    If you take a loan against your 401k you pay interest to yourself. Unless you quit your current job. http://www.401khelpcenter.com/loans.html#.Wwy6wctlAwA look at the pros section.
    May 28, 2018 3
    • New AMex31
      Hey so if you pay interest to yourself, is the interest treated like investment returns?
      May 28, 2018
    • Microsoft h1bitch
      I'm not sure. But my understanding is that it's treated as pre tax 401k contribution just like your regular 401k investment. But I would confirm first.
      May 28, 2018
    • New AMex31
      Thanks
      May 28, 2018
  • Workday Username68
    Notice that the interest you pay to yourself for 401k loan will be double taxed (you pay interest with after tax money and when you retire and withdrew they are taxed again).
    May 28, 2018 1
    • Amazon roder
      Not if it's a Roth
      May 29, 2018
  • Amazon Mary2018
    NEVER loan money to family. Just don't do it. Especially not if you need it back.
    May 28, 2018 1
    • Amazon roder
      This. Gift money to family.

      Or make it a loan with no expectations of payback. My dad loaned my uncle money for a down payment. He made it a mortgage loan (2nd mortgage) with low interest and no payment required but he'll get back his principal one day when the home is sold.

      That creates no tension with the uncle since there's no expectation that he pay anything until the house is sold. It meant my nephews grow up in a house instead of an apartment.
      May 29, 2018
  • Salesforce JaEE06
    You should sell stocks because ideally you shouldn’t keep your own company’s stock anyway. Touching your 401k is playing with fire.
    May 29, 2018 0
  • Microsoft / Eng Charmie
    Just tell them you don’t have the money in cash
    May 29, 2018 0
  • Microsoft mspgk
    Get a personal loan at 10% apr and charge it to your bro..
    May 29, 2018 0