145 - Should I Ever Borrow Money to Invest?
An episode of the Real Personal Finance podcast, hosted by Scott Frank and James Conole, titled "145 - Should I Ever Borrow Money to Invest?" was published on March 30, 2022 and runs 19 minutes.
March 30, 2022 ·19m · Real Personal Finance
Summary
Scott and James discuss if you should borrow money to invest. Listener Question Currently have a 401k company match up to 7%. They also allow us to borrow against our 401k up to $50,000. Also have a Roth IRA but not able to make the max contribution. 401k loan is a 5% note on a 60 month term (only option) but maxes out at $50k and can have multiple loans against the 401k (only pay off early option is to pay note in full). Knowing the risks of losing the job or leaving, we have a HE...
Episode Description
Scott and James discuss if you should borrow money to invest.
Listener Question
| Currently have a 401k company match up to 7%. They also allow us to borrow against our 401k up to $50,000. Also have a Roth IRA but not able to make the max contribution. 401k loan is a 5% note on a 60 month term (only option) but maxes out at $50k and can have multiple loans against the 401k (only pay off early option is to pay note in full). Knowing the risks of losing the job or leaving, we have a HELOC to bail us out in a pinch. Realizing we lose the compounding interest on the loan amount but taking that loan and putting it towards to Roth would offset that lost gain and help with my tax advantages when the withdrawal party starts all the while my interest payments are going back into the 401k. My thoughts are to take out a loan each year to apply towards the Roth until I either max out the loan amount or I can make the full contribution amount again. Am I crazy to think this is a good idea? |
Planning Points Discussed
- Retirement Planning
- Utilizing Time Efficiently
- Capital Appreciation
- Purchasing Power
- Other issues (IRAs, Inflation, Financial Goals, etc.)
Timestamps:
3:54 - Cash Flow
6:49 - HELOC Example
9:16 - RMDs (Required Minimum Distributions)
11:47 - Gross Income v. Net Income
14:18 - Retirement Savings
16:35 - Tax Optimization
19:05 - Aligning Your Financial Goals
LET'S CONNECT!
James
Scott
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