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Based on my reading, it seems that the CARES act allows you to borrow up to 100K from retirement account, which then has to be paid back within 5 years.
There is no penalty for early withdrawal and while you do pay interest, it is to your own retirement account, actually allowing you to contribute more than the $19,500 max.
I have approx 300K in my accounts combined (403b and 401A) as well as additional $ in 457. (Not touching Roth IRA, or HSA)
Medical school loans are at 4.75%, whereas the retirement account loan rate will be 4.25%.
I have started a new job that is for profit so below is my plan -
1. Roll over 403b and 401A into new job’s 401k.
2. Take my distribution for my 457b from old job as a lump sum (since my income is smack in the middle of a range, this will not push me into the next bracket, and taking it in installments will not drop me into a lower bracket)
3. Use the lump sum $, after taxes, and borrow remaining from new 401k to pay off entirety of medical school loans.
4. Contribute 19k to new job’s 401k, while also contributing (approx) 20K per year to paying back the loan (this will not decrease my take home by any measureable amount, since I was already contributing 19K - although pre-tax - to my old job’s 457.)
5. Continue to contribute towards my Roth IRA and HSA (these will not be affected)
OR
1. Buy lottery tickets
I realise that I may (or likely will) get a higher rate of return if I left the 100K in 401K, but assuming a 7% return (vs the 4.5%) I would stand to “lose” approximately $16K over 5 years which to me seems worth the mental relief of getting this monkey off my back.
Thoughts?
Is this completely insane... or just mildly insane?
Thanks
There is no penalty for early withdrawal and while you do pay interest, it is to your own retirement account, actually allowing you to contribute more than the $19,500 max.
I have approx 300K in my accounts combined (403b and 401A) as well as additional $ in 457. (Not touching Roth IRA, or HSA)
Medical school loans are at 4.75%, whereas the retirement account loan rate will be 4.25%.
I have started a new job that is for profit so below is my plan -
1. Roll over 403b and 401A into new job’s 401k.
2. Take my distribution for my 457b from old job as a lump sum (since my income is smack in the middle of a range, this will not push me into the next bracket, and taking it in installments will not drop me into a lower bracket)
3. Use the lump sum $, after taxes, and borrow remaining from new 401k to pay off entirety of medical school loans.
4. Contribute 19k to new job’s 401k, while also contributing (approx) 20K per year to paying back the loan (this will not decrease my take home by any measureable amount, since I was already contributing 19K - although pre-tax - to my old job’s 457.)
5. Continue to contribute towards my Roth IRA and HSA (these will not be affected)
OR
1. Buy lottery tickets
I realise that I may (or likely will) get a higher rate of return if I left the 100K in 401K, but assuming a 7% return (vs the 4.5%) I would stand to “lose” approximately $16K over 5 years which to me seems worth the mental relief of getting this monkey off my back.
Thoughts?
Is this completely insane... or just mildly insane?
Thanks
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