Using your 401k loan as Reserves

[Frankie Woods]

I'm struggling with the "where do you put your reserves" debate.  I'm pretty confident that relying on credit cards and lines of credit may not be wise in a black swan event.  In that regard, if you have $50k in a 401k that you can loan yourself, is this a good strategy to protect yourself in case of some unforeseen expense/emergency?  Is the timeframe between applying for the loan and receiving the funds prohibitive.  The only real downside is needing to pull the money out if the economy goes to sh**.  What have others experienced in their investing career!  Is there a better method other than using checking/savings accounts and CDs?  Anxiously awaiting your responses!

[Chinmay J.]

Originally posted by @Frankie Woods:

I'm struggling with the "where do you put your reserves" debate.  I'm pretty confident that relying on credit cards and lines of credit may not be wise in a black swan event.  In that regard, if you have $50k in a 401k that you can loan yourself, is this a good strategy to protect yourself in case of some unforeseen expense/emergency?  Is the timeframe between applying for the loan and receiving the funds prohibitive.  The only real downside is needing to pull the money out if the economy goes to sh**.  What have others experienced in their investing career!  Is there a better method other than using checking/savings accounts and CDs?  Anxiously awaiting your responses!

 No its not prohibitive at all. I have gotten it in less than a week. 

I don't understand what you mean by the "The only real real downside........"   My understanding is that the only real downside is that if you get laid off from the job, then the money is due immediately. Another downside is that until you repay your loan back, you get a smaller paycheck as part of your paycheck goes towards repayment of the P and I of the loan.