retirement

4 reasons to take out a 401(k) loan

It's for a smart investment
It's for a smart investment © Yuri Arcurs/Shutterstock.com

It's for a smart investment

Under certain circumstances, borrowing from a 401(k) to purchase a home, finance a business or advance your education might be worth considering. The repayment period is often extended for homebuyers.

For example, Gordon had clients who had just moved to a new city and wanted to buy a house. They already had rolled over the 401(k) from a previous job into an IRA -- and you generally can't borrow from an IRA. So to get money for the down payment, they rolled money from the IRA into a new 401(k) and borrowed it back.

He cites another case in which an entrepreneur rolled money from an IRA into a solo 401(k) in order to take out money to invest in his business.

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