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Originally Posted by rogerc1944
Maybe I wasn't sufficiently clear. If you borrow money from a tax deferred account, you repay the loan with money that has been taxed at your marginal rate. This is very expensive money independent of how long it takes to repay. If your marginal rate is 25%, it will cost you $1250 for that $1000 loan. This man appears to be talking about taking out a 60 day loan for about $4000. The $5000 cost means the arithmetic is not good.
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No.......I was talking about a rollover.....not a "loan". I guess you could call it a 60 day "loan", but rollovers have different requirements than loans. In any event there are several of us that do not agree with the double taxation concern.......bottom line it just depends on how big the emergency is. My thought was to take the money from the 401k and he has 60 days to complete an IRA rollover. That might allow sufficient time for proceeds from sale of property to be used to fund IRA and complete the rollover. If you do not complete the rollover, the penalty is 10% (much better that 25%)
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"there is reasonable money to be made in lending people money to buy houses. I refuse to believe that there is, really and sustainably, enough money in it for the originators and the servicers and the insurers and the bond underwriters and a hundred different tranche buyers and swap dealers and my pet kitty to take a piece of the interest." -Doris Dungey (Tanta) of Calculated Risk
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