I was considering taking a loan out, but my first question was whether I had to pay it back with pre-tax or post-tax dollars.
I have that answer which makes it less appealing. After tax dollars
Then I found this topic, which even in the comment section people are not certain about.
Just thought I’d share this in case anyone is considering it too.
After reading all the comments I can see how people think it’s taxes twice, and I can see how it’s not.
Read the comments.
Good discussion.

https://thefinancebuff.com/401k-loan-double-taxation-myth.html

Interesting can’t wait to see the responses here.

Mrs. Irish took out a loan from her 401k. Bought beach property with the money about 6 years ago. Just sold the beach property and tripled her investment. It worked out good for her.

Better than taking out a loan with a mortgage company in the fact that at least you are paying yourself back with interest. If you take out a loan, you are paying someone interest, so why not pay it to yourself. So all the money went back in, and she "earned" 3.75% on it, plus she made a 300% return on the money she invested.

I borrowed about $50k to buy the land and build our cabin. I paid it all back in 5 years at 3.5%. Now my cabin is worth about $250k. So I guess that's about a 500% return.

I wouldn't recommend taking a 401k loan to buy a depreciating asset, but we certainly thought those two were worthwhile reasons.

Yeah I had to explain that to a coworker recently. You take money out for the loan, you pay taxes on it. Pay it back (interest pays back to your account). Then when you take it out for retirement, it gets taxed a 2nd time. I’d have to be in a serious bind before I’d go that route.

If you take a loan from your 401k the loan amount you receive is not taxed.

If you take an early distribution then there is a penalty plus the distribution is considered taxable income.

You don’t get taxed on the loan money so yeah it’s a fair deal

That percent you pay yourself back is significantly lower than the % you will earn keeping it in there. (My opinion)

It does nothing but benefit your lender, and very few people have the same experience as Mrs. Irish.

Don't forget to factor in the amount of return you would be losing on the loan amount over the term.

Eclipse worded it better that me for sure

I heard if this is a employer sponsored 401k and you quit, retire, or get fired to have X amount of time to pay the back the loan in full or the outstanding loan amount is taxable.

Yep, I got stuck on that 4 years ago when I changed jobs. At the time of the loan I was of the understanding that if there was an employment change I could setup the remainder of the balance on a payment plan and just keep on paying like before but just writing a check instead of direct withdrawal. Nope, pay in full or consider it a distribution and pay taxes on it. The balance remaining wasn't large but that was a hard pill to swallow. I don't think I'll be doing that again.

Fidelity said those rules are set by the employer, so some companies may let someone pay it back on a payment plan if there is an employment change. Mine would not.

It depends... Both our 401k's are in negative numbers right now, so honestly, 3.75% sounds pretty damn good.

But yeah, I know what you are talking about.

This is an important point.

When we were building the cabin, it was going to be a debt free place we could live in retirement, so in effect we were taking our retirement fund and investing it in our retirement. It has certainly paid off for us, but in this case we are the exception to the rule.

Like I said, borrowing the money for anything but a guaranteed money making investment is a false economy.

Yep. This is another important point. At the time we borrowed our money both of us were very entrenched in our companies. If our positions weren't stable, no way we would have done it.

That’s correct my mistake. I was thinking about a withdrawal, but usually is a fee on the loan.