The Real Cost of Retirement Plan Loans

Still, lots of people are attracted to retirement plan loans because of the low rate and the fact that you're paying this interest to your own account. The latter feature is what leads many people to proclaim that 401(k) loans allow you to “pay yourself back.”

But are you really? Well, yes and no.

You are “paying yourself back” in the sense that you're not paying interest to a bank. But if you hadn't withdrawn the cash for the loan, that money would still be invested in something in your account, and that something probably would have been earning interest or other returns all on its own.

So instead of letting your investments earn returns, you have to dig those returns out of your own wallet.

Some of my ...

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