401K loan for the investor with a w2 job

[Reggie Rearden]

So i was wanting to take a 401k loan out last week. I kick myself in butt for not following my gut and not doing it since i lost several thousands, like everyone else, the past several days. I'm wanting to purchase SFH with cash while i have a other closings ongoing for the next few weeks which ties up a lot of my cash. I'm concerned that if i do the loan now, in a few days the markets could creep up slightly giving me access to more 401k. I'm way to ignorant about 401k and stock markets to make an informed judgment on what i should do. Anyone have a similar scenario or advice?

[Lauren C.]

Originally posted by @Reggie Rearden:

So i was wanting to take a 401k loan out last week. I kick myself in butt for not following my gut and not doing it since i lost several thousands, like everyone else, the past several days. I'm wanting to purchase SFH with cash while i have a other closings ongoing for the next few weeks which ties up a lot of my cash. I'm concerned that if i do the loan now, in a few days the markets could creep up slightly giving me access to more 401k. I'm way to ignorant about 401k and stock markets to make an informed judgment on what i should do. Anyone have a similar scenario or advice?

Trying to time the stock market is a total crap shoot.  It is really meant for long term investing. There can be major swings in a short period of time. I think the volatility in the market is here to stay for the foreseeable future. The bigger question to me is: are you willing to accept the fes and taxes associated with the withdrawal from your 401k?  Does the RE investment gains offset those fees?  If so, don't worry about trying to time the market.  Better people than you and I have tried and failed to do just that.

[Reggie Rearden]

I'd be taking a loan out which will be deducted every pay period from my check by my employer. There are no fees for a 401k loan for me. 

[George Blower]

Originally posted by @Reggie Rearden:

I'd be taking a loan out which will be deducted every pay period from my check by my employer. There are no fees for a 401k loan for me. 

Here are the general considerations regarding 401k loans.

401k Participant Loans

• If your 401k plan allows for 401k participant loans, the maximum loan amount is equal to 50% of the balance up to $50k. The repayment terms for a 401k participant loan are equal monthly/quarterly payments of principal and interest (typically prime plus 1%) over a 5 year term (longer if used to acquire your principal residence).
• Please note that if you take a full $50,000 and then pay back the loan, you can't take another $50,000 until 12 months after the first loan was fully paid back.
• Per the loan offset rules that went into effect with the 2018 Tax and Job Act: if you leave your job and the loan is current at the time you leave your job but then the loan goes into default because you left your job, you will have until your tax return deadline (including any timely filed extension) to make the loan current by depositing the outstanding balance into an IRA (and thereby avoid the taxes and penalties that would otherwise apply).

Please keep in mind the multiple loan rules:

Under those rules, the sum of the balances of a participant's outstanding 401k loans under a single 401k plan (using the highest outstanding balance of each loan over the last 12 months) can't exceed 50% or $50,000 whichever is less. Thus, if you took a $50,000 loan and paid it back within 6 months, you would need to wait another 6 months before you could take another $50,000 loan.