401K Loan - How do you account for it?

[Keith Jablonowski]

How would you typically figure in a loan from your 401K into your rate of return?

I wouldn't think you would calculate as debt service since the interest you are paying is to yourself but it does effect your available cash flow since you do need to pay yourself back.

Do you just treat is as a cash investment?

[Chris Wosnitzer]

Keith J. -- your not able to withdraw money out of a current employers 401k to roll into a SDIRA only after separation of service. The employers plan documents also usually dictate what you can invest in as well, stocks bonds, mutual funds etc. and what mutual fund companies you can invest with as well. If you have other 401ks at prior employers, or bank ira etc those can be rolled into a SDIRA.

My opinion is that your IRA/401K is not really yours until you take a withdrawal and pay the taxes! It is a tax deferred account to be used sometime in the future.

If you borrow money from your IRA (even though it is your money) treat it like it is any other lender... It should always be a separate line item as debt service. YOU are not earning the interest YOUR IRA IS...which is a tax deferred instrument.

if you do not pay it back you personally subjected to income tax on the distribution and possibly an IRS 10% early withdrawal penalty.

A loan from the 401k is a Debt/liability to your business/person and an asset/investment for your 401k.

Keep your 401k and your business separate If you keep that in mind it will also help you to in avoiding prohibited transactions once you open an SDIRA.

Just to confuse you some more you could take the loan from the 401k and use it for anything you like or even open a SDRoth!!