Borrow from 401K or cash in my CD

Discussion in 'After Hours Lounge (Off Topic)' started by Jay H, Oct 27, 2005.

  1. Jay H

    Jay H Producer

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    I will be closing on a house (primary residence) in December and would need about $60k down after all the fees, I'm wondering if you financial gurus out there would recommend that I either

    1)Borrow from my 401k, which I can borrow up to $50k on
    2)Cash in a $50k CD early (maturity is 8/06). Penalty is 3 months interest.

    Now, I know the pros and cons of borrowing from the 401k, i.e. interest you pay on the loan goes into the 401k. If I get laid off or fired, it's treated like a withdrawal, penalties, must be repaid within 60 days, etc. etc.

    I don't need much and the only reason I'm considering this is I'd like to keep at least $10k in the bank for my platinum account. I think I'll at most need $10-$15 to meet my closing costs so it's nothing earth shattering.

    Assuming I can still contribute to my 401k pretax while I have the loan out, which source do you think I should exercise, cash in my CD early or just borrow a bit from my 401k plan?

    jay
     
  2. Kirk Gunn

    Kirk Gunn Screenwriter

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    Most plans will let you continue to pay it off as long as you continue to hold the 401k. I've taken 2 loans on 401k's, then switched jobs. The plan holders (Aetna, then TRowe) allowed me to continue making payments.

    Not saying that is what is best for you.... I would think the return on your 401k is better than the CD.
     
  3. Jay H

    Jay H Producer

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    My 401k is through Wells Fargo and yes, my return on the 401k is better than my CD which is like a measely 2.85% when I first got it 2 years ago (9 month, matured in 8/05, reneewed for a year cause I missed the renewal)

    Jay
     

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