401k loans
Hello Terry. I am employed and so far I am not in jeopardy of losing my job. I am prioritizing my financial situation. I just had a life change and no longer need to pay for housing and thus my take home income has doubled. I still need to pay $4000 in credit card debt and am doing this now.
Two years ago I borrowed against by 401k to pay some debt ($7000). I am repaying this through small payroll deductions. Should I continue this or save up my new-found income and quickly pay off the 401k loans? Or should I invest somewhere else? Thank you
Terry Says
If you leave your job and haven’t repaid the loan, it will be considered a taxable withdrawal — and subject to an additional 10 percent penalty if you are under age 59-1/2. PLUS, money in the plan grows tax deferred. That’s a great reason for repaying the loan ASAP. BUT, since you are probably paying a high rate of interest on the credit card debt, pay that off first, and quickly!
