Should my boyfriend withdraw from his 401k to buy a new car?
curious mind asked:
My boyfriend is only 21 years old with a significant amount of $$$ in his 401k and hes thinking about getting a new car. Should he withdraw from his 401k account or get a loan from his 401k account?
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My boyfriend is only 21 years old with a significant amount of $$$ in his 401k and hes thinking about getting a new car. Should he withdraw from his 401k account or get a loan from his 401k account?
April 18th, 2009 at 9:10 pm
He should not do either. That will be a VERY expensive car. There are taxes and penalties for withdrawing from a 401k, and borrowing isn’t any smarter.
He should save up and buy a car that he can afford.
Most millionaires don’t buy new cars. Why? Because it’s stupid! The thing loses 40% of its value the minute you drive off the lot!
April 21st, 2009 at 3:04 pm
Absolutely not!
April 22nd, 2009 at 6:58 pm
401k are for retirement or major life’s events like buying a first car, a major medical expense, etc. It’s really dumb to withdraw from 401k to buy something like a car.
A loan, however, can be an acceptable move if it is paid back in full including the interest gain that would have accumulated had the $$ not been loaned out.
April 24th, 2009 at 6:00 am
Bad Bad Idea. He will be paying like a 10% penalty plus all the income tax for what he withdraws. Go the the bank or auto dealer and get a loan. It will also help his credit out to have an auto loan. Make the payments on time and in full and his score will go up.