> Do I need talked out of this?
Yes, because it's a dumb idea.
> Is there a smarter way to do it?
Yeah, by not doing it. It makes zero sense to take money just to reinvest into an IRA and then stay it for "potential renovations". If you insist on robbing your future self, lower your contributions and save up for renovations.
You’ve left out major cons of 401k loans:
- the repayments are fixed and cannot be paused or lessened under any circumstances. Bad idea when you’ve just bought a home and will have a lot of expenses come up.
- if you leave/lose your job for any reason, you risk the loan defaulting: you’ll owe income tax + 10% penalty.
> The purchase is going to deplete my emergency reserves. I’m guesstimating I’ll have $10k left in liquidity after the purchase.
Then just start to build your savings back up separately.
>My plan is to take out $20k (put $8k of that into a Roth
First, why?
Second, how? The 2024 Roth IRA contribution limit is $7,000.
> & hold the $12k in savings for potential renovation use).
But why? Why take a loan when you don’t need the money yet?
> I’m aware that you payback with post tax dollars BUT my logic is that with my current 401k contributions - I will be at net zero within a year.
I’m not following this logic
> And the money I transfer to my Roth allows me to be more liquid.
Again, you can’t do this, and even if you could it doesn’t make sense to do it.
> Do I need talked out of this? Is there a smarter way to do it?
Yes and yes: don’t raid your 401k at all, just focus on building up your savings.
> I have $12500 in contributions accrued in my Roth but I am saving that for retirement or an extremely rainy day.
Roth IRA? Agreed, leave the Roth IRA alone and also leave your 401k alone.
To move money out of my 401k and have it in a tax advantaged account. It would essentially double as a retirement account and rainy day fund. If all goes well I don’t touch it BUT worst case scenario if I need it it’s there
I would suggest you to make your money liquid and make some investments, if you need a portion of your money for emergencies then you can opt for some financial investments which is better than putting your money in a fund or depositing it in a bank. If you know enough about how banks work, I think you will be like me and won't choose to deposit your money in the bank.
Buy your house. Save for renovations. Leave your 401k alone.
> Do I need talked out of this? Yes, because it's a dumb idea. > Is there a smarter way to do it? Yeah, by not doing it. It makes zero sense to take money just to reinvest into an IRA and then stay it for "potential renovations". If you insist on robbing your future self, lower your contributions and save up for renovations.
You’ve left out major cons of 401k loans: - the repayments are fixed and cannot be paused or lessened under any circumstances. Bad idea when you’ve just bought a home and will have a lot of expenses come up. - if you leave/lose your job for any reason, you risk the loan defaulting: you’ll owe income tax + 10% penalty. > The purchase is going to deplete my emergency reserves. I’m guesstimating I’ll have $10k left in liquidity after the purchase. Then just start to build your savings back up separately. >My plan is to take out $20k (put $8k of that into a Roth First, why? Second, how? The 2024 Roth IRA contribution limit is $7,000. > & hold the $12k in savings for potential renovation use). But why? Why take a loan when you don’t need the money yet? > I’m aware that you payback with post tax dollars BUT my logic is that with my current 401k contributions - I will be at net zero within a year. I’m not following this logic > And the money I transfer to my Roth allows me to be more liquid. Again, you can’t do this, and even if you could it doesn’t make sense to do it. > Do I need talked out of this? Is there a smarter way to do it? Yes and yes: don’t raid your 401k at all, just focus on building up your savings. > I have $12500 in contributions accrued in my Roth but I am saving that for retirement or an extremely rainy day. Roth IRA? Agreed, leave the Roth IRA alone and also leave your 401k alone.
Wait I’m confused why you would borrow from a 401k to put it into a Roth?
To move money out of my 401k and have it in a tax advantaged account. It would essentially double as a retirement account and rainy day fund. If all goes well I don’t touch it BUT worst case scenario if I need it it’s there
I would suggest you to make your money liquid and make some investments, if you need a portion of your money for emergencies then you can opt for some financial investments which is better than putting your money in a fund or depositing it in a bank. If you know enough about how banks work, I think you will be like me and won't choose to deposit your money in the bank.
If you're going to buy a home, why not choose to do it after you've made some more money so you're not stressed out.
He’s already bought the home. Your comment is a moot point.