Should I pay off my 401(k) loan early?

[MantaRider]

I think other posters aren't saying you shouldn't have the vacation...they are questioning the choices made for that vacation.

Think of it like ordering a filet mignon on a hamburger budget. No one is saying you shouldn't eat...but you should probably stick to the hamburger if you want to make sure you'll be able to eat each week.

There are ways, just in a hotel switch, to cut thousands from your vacation and put it back towards your goals. That's what most folks are not understanding. Why you MUST have the most expensive hotel at Disney...and not the reasonably priced one that would still work for you, and definitely work for your finances much better...

It's not relevant because I'm not asking for advice about the vacation here. It's happening regardless. I just want to know, if I have 10k, what should I use it for? And I'm asking because if I have 10k sitting around, should I use it all to pay off a loan that is only costing 200 per month (and that money is going towards my retirement anyways?)

I personally would rather stay at a cheaper resort, but my wife really wants to stay at the Grand, so that's that. It's not going to change. I feel like it's a waste of money, but I don't care about resorts like she does.

 

[TwoMisfits]

It's not relevant because I'm not asking for advice about the vacation here. It's happening regardless. I just want to know, if I have 10k, what should I use it for? And I'm asking because if I have 10k sitting around, should I use it all to pay off a loan that is only costing 200 per month (and that money is going towards my retirement anyways?)

I personally would rather stay at a cheaper resort, but my wife really wants to stay at the Grand, so that's that. It's not going to change. I understand it's a massive waste of money, but she feels differently about resorts than I do.

Sometimes you have to tell your spouse that there's no money for their choice. It sucks, but if you can't do it now, you may be looking at a house you can never afford in a future, and a lifetime of living under a stressful debt cloud.

PS - And if the Grand must be stayed in, one can split stay 1 day and get the "I stayed in the GF" experience...

 

[MantaRider]

Sorry gang, I'm leaving this thread. No one is answering the actual questions, and I'm not going to repeat myself over and over. Manta is out.

 

[kiddo76]

It's not relevant because I'm not asking for advice about the vacation here. It's happening regardless. I just want to know, if I have 10k, what should I use it for? And I'm asking because if I have 10k sitting around, should I use it all to pay off a loan that is only costing 200 per month (and that money is going towards my retirement anyways?)

Use the 10K to pay off the 401k. The 401K money should never have been touched to begin with, but the damage is done. That loan should be paid of ASAP, including making some major sacrifices to reach that goal.

 

[mjkacmom]

Use the 10K to pay off the 401k. The 401K money should never have been touched to begin with, but the damage is done. That loan should be paid of ASAP, including making some major sacrifices to reach that goal.

I think this has been the answer across the board, because it’s the right answer. However, unless the OP and his wife have a come to Jesus meeting with someone who can help them manage their finances and make better choices, I don’t see a good financial future.

 

[kiddo76]

I know, I know. My husband and I have the same personality type and are both exceedingly rational (sometimes to a fault). Since we are so similar and agree on nearly everything it's a constant struggle to understand why other people do what they do. Our two oldest children are intuition/feeling/emotion kind of people so it's going to be a challenge for us to completely refrain from helping guide their financial decisions.

They will learn a lot just by your example.

I've been with my DH for over 20 years. At first glance, it appeared that my married ILs were wealthier than my divorced parents. However, both my parents were able to retire fully at 65 and only ever had to take their Required Minimum Distributions, without any change to their standards of living. FIL, on the other hand, is 71 and still has to work a side job after his retirement and they are still struggling to keep up with their standard of living.

My parents were both able to enjoy retirement doing things they wanted to do. My ILs are still totally stressed out about finances.

 

[mjkacmom]

I really feel like you guys aren't listening when I say this vacation isn't about me. I had a serious medical emergency this year, and because of that we have decided that before we hit any other goals, we are taking a nice vacation together as a family.

The ONLY thing I have asked about, is whether I should put that extra 10k towards a house, my savings, or towards the loan. Everything else is irrelevant. Would I personally like to put the 4k we are spending on vacation towards other things? Sure, but I also want to have good memories with my family incase something happens to me.

By the time we move, we will have roughly 6k in savings set aside post move, and at that point I plan to hit the 401k loan as our next goal. Thanks for your input, but it's time to close out this thread.

Why did you even post your question then? I believe every single person said to pay that 401k loan, and now it’s you next goal? This seems to be a case of financial immaturity. I browsed some of his other post, someone isn’t thinking straight. The fact that he wants to move to Orlando (I’m guessing a higher COL than PA) because his wife wants to work for WDW (known not to pay well) says something.

 

[tzolkin]

The ONLY thing I have asked about, is whether I should put that extra 10k towards a house, my savings, or towards the loan. Everything else is irrelevant. Would I personally like to put the 4k we are spending on vacation towards other things? Sure, but I also want to have good memories with my family incase something happens to me.

By the time we move, we will have roughly 6k in savings set aside post move, and at that point I plan to hit the 401k loan as our next goal.

You have made quite a few posts each offering bits of information, so I think it's hard for us to get a clear picture to offer the best advice.

Do you really have an "extra" $10k? You mentioned in one post that you could save $1500 per month but that you had several places where that money was going to be allocated so it's not clear how much you actually will have to put toward the 401k or other goal(s). Is the vacation coming out of that $1500 per month or did you already pay for it?

How are you going to have $6k left over after a vacation, moving, and a down payment on a house? You mentioned in one post that you do not have an emergency fund, so is all of this money coming from the $1500 per month you're saving? How far out from now are you planning to move? I assumed it would be in the next few months, but perhaps it's a more long term goal (which would change what people are recommending).

Also, slightly OT, but how are you spending a full week at the Grand Floridian for $4,000? I'm fairly certain most of us were thinking this trip would be in the $10-15k range so that's a drastic difference in price.

 

[kiddo76]

I thinks it's also worth noting that money in a 401k cannot be touched by creditors other than the IRS. By keeping that 10K out of the 401k, you risk completely losing that money to creditors, rather than keeping it safe for retirement. And from what the OP has shared, it sounds like another financial crisis is highly probable.

 

[DrummerBoy523]

Hey folks,

I have a 401(k) loan of a little under 10k that I had to take out last year to cover medical bills and moving expenses. It's currently being paid off $200 per month, and if I don't touch it otherwise will be paid in 2024. My question is this - should I save up to pay it off early, or put that money towards other things? I can't do it piecemeal, the plan only accepts full payments. I know that money will be earning me a lot more in a 401(k) than it would otherwise. But here's the thing - if I have 10k to use, would that be better put towards other goals?

We are currently working on building an emergency fund, we want to move to Florida from PA, and once we are in Florida, we want to finally stop renting and buy a house. If I can save up 10k, would it be better put towards these goals than the loan?

I would pay it off as soon as you can - if you leave the company for whatever reason (you quit, get fired, etc) you have to pay it in full. I would PAUSE your emergency fund and put that money towards your load - and honestly if you have any money in your emergency fund over $1000, I would put ALL OF THAT towards this loan and get it paid off.

 

[wenrob]

The ONLY thing I have asked about, is whether I should put that extra 10k towards a house, my savings, or towards the loan. Everything else is irrelevant. Would I personally like to put the 4k we are spending on vacation towards other things? Sure, but I also want to have good memories with my family incase something happens to me.

Have you considered that if something happens to you that you could leave your family swimming in debt? Or not being being able to pay the bills? Your priority should be to make sure your family is as financially stable as you can. Having health issues should not justify an extravagant vacation it should kick you into gear to make sure you can take care of your family well into the future whether you are here or not. Memories don’t take money or WDW to be made.

 

[StacyStrong]

I would prioritize the loan so that your money can start making some money again.

 

[mjkacmom]

Have you considered that if something happens to you that you could leave your family swimming in debt? Or not being being able to pay the bills? Your priority should be to make sure your family is as financially stable as you can. Having health issues should not justify an extravagant vacation it should kick you into gear to make sure you can take care of your family well into the future whether you are here or not. Memories don’t take money or WDW to be made.

And hopefully you had term life insurance before your illness.

 

[RamblingMad]

And hopefully you had term life insurance before your illness.

Most employers offer life insurance as part of your employment. Better to get long term care insurance that you can actually use when you’re alive. I need to get a policy this year.

 

[mjkacmom]

Most employers offer life insurance as part of your employment. Better to get long term care insurance that you can actually use when you’re alive. I need to get a policy this year.

It depends how much your employer offers, and if both are employed. My husband is insured through work, I think just $100,000, or was at the time we bought term for us, 20 years, a million for him, $500,000. I’m a SAHM and we have 5 children, it was to cover salary, healthcare, childcare, mortgage for several years.

 

[kiddo76]

Most employers offer life insurance as part of your employment. Better to get long term care insurance that you can actually use when you’re alive. I need to get a policy this year.

LTC insurance is kind of expensive and is primarily used to protect one's assets. The OP doesn't have any assets.

LTC insurance is kind of the last check box for financial planning. Term Life is one of the first check boxes, especially once children are involved. Of course YMMV, depending upon what your employer provides and how secure you feel about your continuing employment.

 

[RamblingMad]

LTC insurance is kind of expensive and is primarily used to protect one's assets. The OP doesn't have any assets.

LTC insurance is kind of the last check box for financial planning. Term Life is one of the first check boxes, especially once children are involved. Of course YMMV, depending upon what your employer provides and how secure you feel about your continuing employment.

I’ve never bought life insurance. But I know a lot of old folks that need extended care. Better safe than sorry.

 

[kymom99]

I’ve never bought life insurance. But I know a lot of old folks that need extended care. Better safe than sorry.

Long term care can be a rip off. So many stipulations. My in-laws paid into some for years and ended up getting about $4000 worth of care. And my mother in law was ill for a while with COPD.

 

[kiddo76]

I’ve never bought life insurance. But I know a lot of old folks that need extended care. Better safe than sorry.

I understand your point. However, someone will still be able to receive Long Term Care without LTC insurance because Medicaid will cover the cost once they qualify. For the OP's current situation, if LTC becomes required, they would qualify for Medicaid fairly quickly. There's no financial aid for loss of income due to a spouse's death (unless you count Welfare, which doesn't sound that far off for the OP).

 

[RamblingMad]

I understand your point. However, someone will still be able to receive Long Term Care without LTC insurance because Medicaid will cover the cost once they qualify. For the OP's current situation, if LTC becomes required, they would qualify for Medicaid fairly quickly. There's no financial aid for loss of income due to a spouse's death (unless you count Welfare, which doesn't sound that far off for the OP).

There is no way I’ll qualify for Medicaid.