Suze Orman Advises Against ER!

[Texas Proud]

The bank example is not a valid/fair comparison unless I own the bank like I "own" my 401k. If I do indeed own the bank, and then pay loan interest to it, yes, I will be doubly taxed, just like I am doubly taxed on interest in the case of a loan from my 401k.

No, it is exactly the same... at the end of the day your 401 made interest income and you paid interest expense.... the only difference is who paid the interst income to the 401 and who you paid the interest expense to.... but since you do not want to see it that way... have a great day...


PS... in your example of interest free loans.... yes, you are then taxed on the interest income you pay to the 401.... but then you got a BENEFIT from that money that you are not supposed to get.... forcing you to pay interest on that money removes that benefit....

 

[Bestwifeever]

No, it is exactly the same... at the end of the day your 401 made interest income and you paid interest expense.... the only difference is who paid the interst income to the 401 and who you paid the interest expense to.... but since you do not want to see it that way... have a great day...

PS... in your example of interest free loans.... yes, you are then taxed on the interest income you pay to the 401.... but then you got a BENEFIT from that money that you are not supposed to get.... forcing you to pay interest on that money removes that benefit....

Yes.

If you took out $10k from your 401k and the next day you realized you didn't need it and paid it right back with that same money you would not be taxed on it. If you bought a car with that 401k money you would not be taxed on it (unlike buying a car with a conventional loan and making those payments with aftertax money). The Vanguard explanation is clear imho.