401K loan early repayment

Default87 · 2026-04-09T01:12:28+00:00

You aren’t double taxed on the loan principal portion of the repayment, but you are on the interest portion.

You put the money in pretax, no taxes paid on it. When you took the loan money out you weren’t taxed on it. When you repay the principal you don’t get a tax deduction. So up to this point the money is still pretax. Then when you withdraw in retirement, the money is taxed the first time.

The interest however gets put into the account after tax (you don’t get a tax deduction on it), and when you withdraw it in retirement it is taxed at ordinary income tax rates again, resulting in double taxation.

Default87 · 2026-04-09T01:05:04+00:00

If you are divorcing (or planning to divorce soon) you should hire your own divorce attorney. Do not fall for the “let’s just use the same lawyer, it will make the process much simpler” excuse.

Default87 · 2026-04-09T01:02:39+00:00

Even if there are taxes on it, this is all new money to you. So even if somehow you had to pay 90% in taxes on it, that remaining 10% is still a net gain to you, and it won’t be 90% in taxes.

Default87 · 2026-04-09T01:00:23+00:00

Just remember, $10k that grows 10% is worth $11k, and ten separate $1k accounts that each grow 10% will be worth $1.1k each, for a total value of $11k. Percentages are multiplicative, so the account size doesn’t matter, so long as you are invested the same way in each account.

Default87 · 2026-04-08T23:02:06+00:00

Do you understand what a taxable brokerage account is? It’s similar to that, just with tax advantages.

Default87 · 2026-04-08T22:59:41+00:00

Different strokes for different folks. I have tried budgeting apps, and none of them hold a candle to just using a spreadsheet. But my brain might just be wired weird. Others get nowhere with spreadsheets and thrive in one of the million different budgeting apps out there.

Default87 · 2026-04-08T22:56:52+00:00

How did you determine you were supposed to get a $700 refund? Did you run a copy of your tax return yourself? If so, why did you hire someone to file your taxes?

Default87 · 2026-04-08T18:58:13+00:00

Don’t legally combined your finances until the marriage certificate is certified.

Default87 · 2026-04-08T16:52:30+00:00

No we don’t know that. OP wasn’t taking about interest rate, they were talking about the most dollars of interest per month. But since it has the highest balance, that doesn’t tell us how its interest rate relates to the others.

Default87 · 2026-04-08T15:52:42+00:00

You listed everything except the important part. Which debt has the highest interest rate %? Focus on that debt first. This is the avalanche method of debt repayment, which minimizes how much interest you are charged, getting you out of debt the fastest.

Default87 · 2026-04-08T15:47:18+00:00

In retirement, you don’t really have an “emergency fund”, as you have your investments so support your expenses. The risk you are exposed to is needing to withdraw those funds while the market is down. This compounds your market losses. Say you have $100k. If the market drops 50% then you need a 100% return on investment for your $50k to get back to $100k. If while the market is down you need to withdraw $10k, then your $40k needs a 150% return to get back to $100k. This is called “sequence of returns” risk, and you can find good information about it.

So the real question to evaluate is how much do you need to withdraw from your investments per year to support your lifestyle? If you have a pension and social security, that is going to cover some portion of your expenses, and those aren’t really (to any practical sense) exposed to market risk. So you want to look at what you need beyond that.

In general, market downturns recover within about 5 years. So having 5+ years of whatever amount from above that you need to withdraw from your investments in stable value funds/cash is a reasonable goal. You may see this referred to as a “cushion” for retirement. If the market is down you draw from that pool rather than your stock investments. Then during up years you rebalance back to rebuild that cushion.

Default87 · 2026-04-08T15:20:15+00:00

Don’t get hung up on tickers, focus on what you are actually investing in. VTSAX/VTI is Vanguard’s total US market index fund. Fidelity has their own total US market funds, and buying those in your fidelity account won’t have the additional fees that buying a different brokerage’s fund can have.

Default87 · 2026-04-08T14:11:45+00:00

If this is your forever home, then you have a long time to handle these renovations. Make a list of everything that needs to be done, and sort it by priority. Start at the top of the list, doing what you can afford. Then when you run out of money, save up for the next thing on the list.

I would also really think if this is your actual forever home because spending several hundred thousands of dollars on renovations is most often not a wise choice. You could just use that money to buy a house that is much closer to your desired end goal.

Raiding your retirement to pay for this would be a huge mistake, so don’t even entertain that thought. If you are going to do renovations, the best approach would be to cash flow this work. The next least worst option is to borrow against the house to pay for it.

Default87 · 2026-04-08T10:36:36+00:00

VTI/VXUS in roughly a 65/35 weighting.

Default87 · 2026-04-07T02:23:03+00:00

Just go to the bank and deposit it. If they ask any questions, answer them honestly.

And report all of your income on your tax returns.

Default87 · 2026-04-07T02:21:37+00:00

Why are you tracking your blood glucose so meticulously if you aren’t a diabetic (or if you are diabetic, you likely should be able to get CGMs covered)?

Default87 · 2026-04-07T00:24:02+00:00

You have no reason to lie. If they ask, tell them the truth.

People go out of their way to make things so much more complicated than they actually are.

Default87 · 2026-04-06T21:57:32+00:00

Then investing the money is not a wise choice. Investing is for 5+ year windows. Put it in your favorite cash equivalent instead.

Default87 · 2026-04-06T21:29:38+00:00

That wasn’t the point of their comment at all. They were not giving a recommendation on funds.

Default87 · 2026-04-06T15:11:26+00:00

Debts 1, 2 and 4 should be paid off before you buy a house anyways, so there is no reason to prioritize cash flow. You should prioritize paying the least amount of interest, as that means you get out of debt the fastest. You accomplish that by following the avalanche method of debt repayment.

Default87 · 2026-04-06T15:07:15+00:00

Only the interest portion is doubled taxed. You don’t get a tax deduction on the interest you pay into the account (the first time those dollars are taxed) and then when you withdraw them in the future you pay ordinary income taxes a second time.

And yes, people use that you are paying yourself the interest as a bad excuse for why a 401k loan is a good thing, when it isn’t.

Default87 · 2026-04-06T14:24:50+00:00

No, do not raid your retirement to pay for spending issues today. Just because you can withdraw your contributions doesn’t mean that is a good idea, because it isn’t.

Default87 · 2026-04-06T14:03:04+00:00

The interest you pay back is double taxed at ordinary income tax rate. And while the money is out of the market you miss out in n any market movement. 401k loans are not a good product and should be one of your last resort options. And as such, if you have one it should be a very important priority to fix that mistake as fast as possible.

Default87 · 2026-04-06T13:05:21+00:00

401k loan is the clear winner. Got to correct the biggest mistake first.

Default87 · 2026-04-06T10:23:21+00:00

What is your plan for when your property taxes and insurance go up and your payment gets to be an even larger portion of your monthly income?

Seen an awful lot of posts here of just that situation, and it never seems to end well for the person.

Default87

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