Although 401k/403b/457b loans may have some utility for certain large purchases in a high interest rate regime (when other options are not available), they are often maligned as "double taxation" even though this is not accurate. Nevertheless, they are still a poor investment choice:
https://www.whitecoatinvestor.com/401k- ... nvestment/
However, for those who expect to give away a significant fraction of their savings they may represent a modest tax reduction strategy. 401K/403b loans allow one to sequester additional investment dollars in a tax-protected account which could reduce the tax burden of maintaining a large taxable brokerage account. For example, a $50,000 401k loan at 6% allows someone to add an additional ~$8000 in interest to a tax protected account while having little opportunity cost if the $50,000 loan is invested in taxable. This could be especially useful it someone has multiple 401k/403b/457b accounts.
https://www.whitecoatinvestor.com/401k- ... nvestment/
However, for those who expect to give away a significant fraction of their savings they may represent a modest tax reduction strategy. 401K/403b loans allow one to sequester additional investment dollars in a tax-protected account which could reduce the tax burden of maintaining a large taxable brokerage account. For example, a $50,000 401k loan at 6% allows someone to add an additional ~$8000 in interest to a tax protected account while having little opportunity cost if the $50,000 loan is invested in taxable. This could be especially useful it someone has multiple 401k/403b/457b accounts.
Statistics: Posted by prioritarian — Wed Jan 08, 2025 11:47 am — Replies 0 — Views 57