Originally Posted by
Brocc15
Now this is nothing new, but I am new so I just looked at it for the first time yesterday, and am wondering if I am interpreting this correctly. We can take a loan out from our retirement savings with a standard amoritization and pay interest, but we are paying the interest back to ourselves so we aren't really being charged anything? And it also said no tax penalties. If that is right, that's awesome. Could you then use that for part of a downpayment for a home and essentially not pay interest on that portion? Maybe I am completely misinterpreting this.
You can borrow up to 50% of your 401K up to $50,000 max. Although the IRS allows up to 5 years Fidelity will only allow 4 years. You pay interest back to yourself on payroll deduction basis (based on whatever the rate is - currently around 4-5%. If you take the max it works out to around $1100 ($550/paycheck). You can pay it back in full with no penalties (no partial paybacks). The one thing you need to be aware of is if you take it out for something like a house you will want to season it (borrow early) so you don't have to account for where the cash came from in your account. You can also withdraw up to $10,000 cash from your IRA for a down payment without penalties. Also, remember you can always withdraw contributions from your Roth IRA with no taxes or penalties (you already used after tax money). Sorry about the long post - used to do mortgage loans on the side (stopped after the crash - not worth the time any more).