Saving Money

[dxdx]

This is true but the interest goes directly into your account so your paying yourself. Actually its a better deal than you can get at a bank. You do pay a small maintenance fee. Mine is $7 a year. Im only talking about 401k. Other retirements / pensions may be different ......

Yeah, but the real reason for not doing this is because you miss out on the increase of price of your shares. In my example, my friend took out his loan in 2010, so if all that money was still in his 401k, he would've gotten a 20% jump because of the increase in the DJIA. I mean, these are really rough figures, but the concept is solid...

if he took out 10k, which is probably in the ballpark, he could have over $12,000 now just from share price increase alone not to mention what he would've added in the meantime.

 

[aldiaz33]

This is true but the interest goes directly into your account so your paying yourself. Actually its a better deal than you can get at a bank. You do pay a small maintenance fee. Mine is $7 a year. Im only talking about 401k. Other retirements / pensions may be different ......

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I pulled my company's plan documents and you are right...the interest goes directly into your account.

Also learned that in the event of termination, the full amount would need to be repaid within 60 days...seems like a risky proposition, since if you had the ability to pay the loan back in such a short period of time, you probably wouldn't need it in the first place.

why arent there SAVINGS ACCOUNTS AT BANKS ANYMORE? ...if I was cynicalI would say they dont need the investment capital anymore ...they get that money from cc intrest and overdraw rip-offs..... did I SAY THAT ...SHAME ON ME

They all offer savings accounts, but the Fed has set rates so low that you don't earn much at all. The best online savings account I have found is Ally bank. Check them out...their rates are better than any brick and mortar bank I have seen (currently 0.95%).

 

[lp85253]

I pulled my company's plan documents and you are right...the interest goes directly into your account.

Also learned that in the event of termination, the full amount would need to be repaid within 60 days...seems like a risky proposition, since if you had the ability to pay the loan back in such a short period of time, you probably wouldn't need it in the first place.



They all offer savings accounts, but the Fed has set rates so low that you don't earn much at all. The best online savings account I have found is Ally bank. Check them out...their rates are better than any brick and mortar bank I have seen (currently 0.95%).

ok thanks

 

[Egon]

Yeah, but the real reason for not doing this is because you miss out on the increase of price of your shares. In my example, my friend took out his loan in 2010, so if all that money was still in his 401k, he would've gotten a 20% jump because of the increase in the DJIA. I mean, these are really rough figures, but the concept is solid...

if he took out 10k, which is probably in the ballpark, he could have over $12,000 now just from share price increase alone not to mention what he would've added in the meantime.

Very good point! In my case this is exact. My 401k is earning 20% year to date. The 50k i pulled out is only earning 3%. Im losing 17% on the 50k part i pulled out :banghead:
Im still able to deposit 17.5k each year just like always while i have this loan out.
Who would of known the market would be doing this good? Its unprecedented, at least in my life. Hindsight is always 20/20.

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[aldiaz33]

Very good point! In my case this is exact. My 401k is earning 20% year to date. The 50k i pulled out is only earning 3%. Im losing 17% on the 50k part i pulled out :banghead:
Im still able to deposit 17.5k each year just like always while i have this loan out.
Who would of known the market would be doing this good? Its unprecedented, at least in my life. Hindsight is always 20/20.

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Maybe the market will drop 60% in the near future and you will come out on top...ya never know...it could happen.

That's the danger of trying to time the market; we know it's going to move and sometimes we will even know what direction it's going to move, but we never know when it will happen...it's totally unpredictable, but it's not unprecedented. The dot.com boom and bust from 1997 to 2003 and more recently the real estate craze and crash are two recent examples.

The difficulty in trying to time the market is that you have to be right twice (when to get out and when to get back in)...even the pros consistently get it wrong...that's why I'm a Boglehead. The best investment info site I know of is Bogleheads.org...some real good stuff there.

 

[lp85253]

Maybe the market will drop 60% in the near future and you will come out on top...ya never know...it could happen.

That's the danger of trying to time the market; we know it's going to move and sometimes we will even know what direction it's going to move, but we never know when it will happen...it's totally unpredictable, but it's not unprecedented. The dot.com boom and bust from 1997 to 2003 and more recently the real estate craze and crash are two recent examples.

The difficulty in trying to time the market is that you have to be right twice (when to get out and when to get back in)...even the pros consistently get it wrong...that's why I'm a Boglehead. The best investment info site I know of is Bogleheads.org...some real good stuff there.

how many people KNEW ABOUT THE MORTGAGE CRISIS .....seems like somebody should have been warning home owners rather than figuring out ways toprofit off widespread misery....

 

[Egon]

how many people KNEW ABOUT THE MORTGAGE CRISIS .....seems like somebody should have been warning home owners rather than figuring out ways toprofit off widespread misery....

The thing is "buy low sell high". Right now housing is very low and interest rates are at a record low! Now is the time to buy especially in Phoenix! Think like a rich guy would, not like a victim.

 

[jlnguyen74]

how many people KNEW ABOUT THE MORTGAGE CRISIS .....seems like somebody should have been warning home owners rather than figuring out ways toprofit off widespread misery....

I believe there were plenty of warnings, but no one was listening...

 

[Inglorious]

I believe there were plenty of warnings, but no one was listening...

Like when the bank was encouraging us to buy a house much bigger and about $75,000 more expensive than we wanted, and got pushy when we "settled" for less than what we could have had.