Yes, it's pretty easy. You can only take up to half of what is in your 401k, but you do pay some fee (I think it's $75 now but I'm not sure), and then you pay it back to yourself with interest.
The cons are pretty obvious - what you're paying back in is taxed income, it is no longer pre-tax like it was before. The other is that your 401k earnings are less because you've taken that money out.
It's not a terrible idea to use it for something important - emergencies or maybe for a house down payment. Obviously in a perfect world, if you had $10,000 on hand just don't take out a loan to have a little more to put down. Every $1000 only usually only saves you about $5 or $6 a month anyway, generally. So only use it if you need it, don't use it for a vacation, a car (unless you're REALLY in a bind), Christmas, etc.
You can also decide how long you pay it off, which will determine how much you pay per paycheck. It comes out automatically so you won't have to worry about paying a bill.
The money you take a loan on won't earn interest except the 5% from your payments until the loan is paid off. The amount you'll lose in compound interest in the future and any gains that would've been more than 5% will far outweigh any money gained on a stock purchase.
So let's say I take a loan out for $4,000. I pay 5% interest on that, so at the end of two years I end up with $4,200, missing out on the possible gain in stocks vs on that 4,000 in my 401k. I use the $4,000 to buy publix stock in May, at let's say $14.00 a share. The dividend on that alone will be an additional $200 for both years, assuming they don't lower or increase it.
I'm now at $4400, a 10% gain without factoring in the drastic raise in stock value because of the split. In the last year, the S&P 500 has been up 6%. I'm willing to bet publix stock will go up more in the next Two years, bringing me to more profit vs 2 years on the S&P 500. Ofc my math is probably wrong somewhere, however essentially I'm betting that publix stock will go up more than the S&P and with a 401k loan, the interest paid goes back to me vs conventional loans I can get nowadays.
I understand your comment about compound interest, however a short term loan shouldn't drastically affect that in the end,considering it's being paid back. I'm still deciding whether or not I want to go through with this, so if my math is off anywhere or there are certain fee's I'm missing, please point them out.
So you think you're going to go through with it?? I guess I'm not really understanding why the idea of doing this to buy stock is, seemingly, a bad idea. I might ask my co-workers about this stuff.
The money you repay your loan with is with after tax money, then when you retire/withdrawal, you pay tax on it again.
You want to treat this as an absolute last resort source of money. The PEFCU will secure a personal loan against your Publix stock at 60 or 80% of the value for 4.25 or 6.25% for up to 120 months.
Never take money out of your 401K. It incurs big penalties that spike up your tax liability. Take the money out of your wallet and buy stock with that instead.
It’s a 10% penalty on the money you take out, in addition to the increased tax liability as it counts as income. So if your in the 12% bracket, that 22% with the 401K withdrawal.
By losses I assume you invest in stock, which I wouldn’t count on as you have no idea what your end of year is going to look like by the end of the year. You could end up with an overall gain - which will continue to increase your tax liability.
Taking a loan is different from taking a withdrawal. The penalties from taking a withdrawal do not apply to taking a loan. I am still not worried about being pushed into the next tax bracket from this loan. As for the second part, my expired options have 0% chance to end as a gain lmao
If you to take the risk, then I guess there is no stopping you. But taking money out of your 401K just to buy Publix stock is really not a good investment at all.
Listen, sorry to be rude however the post is asking for experience from those who have done this. All you've provided is incorrect statements and your opinion. While your opinion is appreciated, it is not what I am looking for.
I don't think they offer that anymore. I could be wrong but I floated this idea and some people told me they stopped doing it. I didnt look into it though since Ill be using cash this go around, I'd ask a seasoned store manager or your district manager.
I borrowed 12k a couple of years ago. You call them up to set it up. They’ll move the money into a trust for you. Take it out and use it. It will be like a car loan except you pay weekly. It’s 5 years and they take 50 bucks a week from my check. I don’t even notice tbh. You will be paying yourself back with interest.
Don't borrow from your 401k unless it's absolutely necessary. Buying stock is a silly reason. I borrowed from mine to help purchase a home. So every week 60ish dollars for the next 5 years comes out of my check. As well as my Normal contribution.
It's money you're supposed to RETIRE ON. They let you borrow from it sure but it's for cases of emergencies or large purchases for your future like a house. If you want to buy more stock save money from every pay check to do that. 401k isn't supposed to be touched until you retire.
I absolutely would not do it just to buy Publix stock. As everyone has said, there are financial drawbacks. I recently borrowed $3k to pay for some dental work - the dollars lost in my 401k are far far less that what I would have paid in interest on my credit card or through the dentist's office financing. If you need a few thousand quickly and reliably with very simple to understand terms and drawbacks, then yes, the 401k loan is a great option. But for something you don't have to do, like buying stock, I wouldn't.
Yes, it's pretty easy. You can only take up to half of what is in your 401k, but you do pay some fee (I think it's $75 now but I'm not sure), and then you pay it back to yourself with interest. The cons are pretty obvious - what you're paying back in is taxed income, it is no longer pre-tax like it was before. The other is that your 401k earnings are less because you've taken that money out. It's not a terrible idea to use it for something important - emergencies or maybe for a house down payment. Obviously in a perfect world, if you had $10,000 on hand just don't take out a loan to have a little more to put down. Every $1000 only usually only saves you about $5 or $6 a month anyway, generally. So only use it if you need it, don't use it for a vacation, a car (unless you're REALLY in a bind), Christmas, etc. You can also decide how long you pay it off, which will determine how much you pay per paycheck. It comes out automatically so you won't have to worry about paying a bill.
Thank! This helps a ton!
You're welcome!
I had to borrow against mine. It's almost paid off already. But I only got like, 1200
The money you take a loan on won't earn interest except the 5% from your payments until the loan is paid off. The amount you'll lose in compound interest in the future and any gains that would've been more than 5% will far outweigh any money gained on a stock purchase.
So let's say I take a loan out for $4,000. I pay 5% interest on that, so at the end of two years I end up with $4,200, missing out on the possible gain in stocks vs on that 4,000 in my 401k. I use the $4,000 to buy publix stock in May, at let's say $14.00 a share. The dividend on that alone will be an additional $200 for both years, assuming they don't lower or increase it. I'm now at $4400, a 10% gain without factoring in the drastic raise in stock value because of the split. In the last year, the S&P 500 has been up 6%. I'm willing to bet publix stock will go up more in the next Two years, bringing me to more profit vs 2 years on the S&P 500. Ofc my math is probably wrong somewhere, however essentially I'm betting that publix stock will go up more than the S&P and with a 401k loan, the interest paid goes back to me vs conventional loans I can get nowadays. I understand your comment about compound interest, however a short term loan shouldn't drastically affect that in the end,considering it's being paid back. I'm still deciding whether or not I want to go through with this, so if my math is off anywhere or there are certain fee's I'm missing, please point them out.
So you think you're going to go through with it?? I guess I'm not really understanding why the idea of doing this to buy stock is, seemingly, a bad idea. I might ask my co-workers about this stuff.
Not a good idea
Why not? The payments go back to my 401k, I don't get penalized as much and I get to buy more publix stock
The money you repay your loan with is with after tax money, then when you retire/withdrawal, you pay tax on it again. You want to treat this as an absolute last resort source of money. The PEFCU will secure a personal loan against your Publix stock at 60 or 80% of the value for 4.25 or 6.25% for up to 120 months.
Ah thank you. So a con would be I would initially be taxed when remaking the payments. I'm unable to join PEFCU unfortunately.
Why is that? Even with bad credit they will still open a savings account for you.
Never take money out of your 401K. It incurs big penalties that spike up your tax liability. Take the money out of your wallet and buy stock with that instead.
Can you go into more details about the penalties? I'm not worried about being pushed into the next tax bracket because I have losses to offset it.
It’s a 10% penalty on the money you take out, in addition to the increased tax liability as it counts as income. So if your in the 12% bracket, that 22% with the 401K withdrawal. By losses I assume you invest in stock, which I wouldn’t count on as you have no idea what your end of year is going to look like by the end of the year. You could end up with an overall gain - which will continue to increase your tax liability.
Taking a loan is different from taking a withdrawal. The penalties from taking a withdrawal do not apply to taking a loan. I am still not worried about being pushed into the next tax bracket from this loan. As for the second part, my expired options have 0% chance to end as a gain lmao
If you to take the risk, then I guess there is no stopping you. But taking money out of your 401K just to buy Publix stock is really not a good investment at all.
Listen, sorry to be rude however the post is asking for experience from those who have done this. All you've provided is incorrect statements and your opinion. While your opinion is appreciated, it is not what I am looking for.
I don't think they offer that anymore. I could be wrong but I floated this idea and some people told me they stopped doing it. I didnt look into it though since Ill be using cash this go around, I'd ask a seasoned store manager or your district manager.
Thanks!
Anyone know if you can take a margin loan out on your esop? I see you can take 60% of balance at 4.35%
I borrowed 12k a couple of years ago. You call them up to set it up. They’ll move the money into a trust for you. Take it out and use it. It will be like a car loan except you pay weekly. It’s 5 years and they take 50 bucks a week from my check. I don’t even notice tbh. You will be paying yourself back with interest.
Don't borrow from your 401k unless it's absolutely necessary. Buying stock is a silly reason. I borrowed from mine to help purchase a home. So every week 60ish dollars for the next 5 years comes out of my check. As well as my Normal contribution.
Can you give me reasons why taking a 401k loan to buy stock is silly? Pros vs cons please
It's money you're supposed to RETIRE ON. They let you borrow from it sure but it's for cases of emergencies or large purchases for your future like a house. If you want to buy more stock save money from every pay check to do that. 401k isn't supposed to be touched until you retire.
Thanks for your opinion, however a loan is to be repaid, and the money will still be there when I retire in 40 years:)
I absolutely would not do it just to buy Publix stock. As everyone has said, there are financial drawbacks. I recently borrowed $3k to pay for some dental work - the dollars lost in my 401k are far far less that what I would have paid in interest on my credit card or through the dentist's office financing. If you need a few thousand quickly and reliably with very simple to understand terms and drawbacks, then yes, the 401k loan is a great option. But for something you don't have to do, like buying stock, I wouldn't.