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Trading using 401K
- Thread starter Adobian
- Start date
Quote from jrlvnv:
Only if you like to get double taxed on the money you pay back.
Let's say I borrow 40K from my 401K at 8% for 5 years and with that funds I pre-pay my mortgage which costs 6% annually. At the end of 5 years I would have 50K in my 401K, my mortgage would be 40K less plus I would not have to give the bank 6% of that for that 5 years AND any other years still left on the loan.
I see your point of double taxation. You must re pay the loan with money that had already been taxed and then when you take distribution you get hit again. However, that can be postponed for most of us for at least 30 years. I'd rather have my house paid off couple of years earlier and get to enjoy the money that would otherwise get spent on mortgage.
Quote from saxon22:
It seems that trading 401K without converting it to IRA is the trick to master. Also, for some reason, futures trading using 401K is not allowed, (featured?) by most firms. Wonder why?
First, you can trade your 401K as long as your employer has the option of a brokerage account. Many large employers now offer this option via Schwab, Fidelity, etc. I believe futures are not allowed in the 401K because of leverage.
Quote from Div_Arb:
I trade the crap out of Direxion 2.5x funds in my Schwab 401k. My employer has it set up so its 100% self directed. I can buy any stock/ETF/CEF or mutual fund. No short selling, options, or futures, but I use Direxion and Ultra Pro funds for shorting and leverage.
If you ever roll your 401K over to a self-directed IRA with a broker then you can use options too.
Quote from saxon22:
Let's say I borrow 40K from my 401K at 8% for 5 years and with that funds I pre-pay my mortgage which costs 6% annually. At the end of 5 years I would have 50K in my 401K, my mortgage would be 40K less plus I would not have to give the bank 6% of that for that 5 years AND any other years still left on the loan.
I see your point of double taxation. You must re pay the loan with money that had already been taxed and then when you take distribution you get hit again. However, that can be postponed for most of us for at least 30 years. I'd rather have my house paid off couple of years earlier and get to enjoy the money that would otherwise get spent on mortgage.
Interesting idea.
What happens if you borrow from your 401k, pay down your mortgage, and at some point you can't repay the loan.
1. Are there tax consequences? Would you get hit with a large IRS bill?
2. Can the 401k administrator sue you for the defaulted loan?
3. If you borrowed from a roth IRA to pay off your mortgage at 6%, and pay back into the roth at 8%, doesn't that get around the issue of double taxation? And a roth earning 8% is nothing to sneeze at...
Assumption is that you have no other debt besides mortgage and 30% average tax bracket. Any CPA/tax types out there that have any idea?
Bottom line - what can you trade from an IRA account? I have read that you can trade futures, but can't have a margin account (scratches head). I have also heard you can trade futures but only cash settled futures. And you can buy and sell options, but no writing options.
Is there a definitive source as to what on can trade rather than the "I think" comments?
Is there a definitive source as to what on can trade rather than the "I think" comments?
Quote from The Bishop:
Bottom line - what can you trade from an IRA account? I have read that you can trade futures, but can't have a margin account (scratches head). I have also heard you can trade futures but only cash settled futures. And you can buy and sell options, but no writing options.
Is there a definitive source as to what on can trade rather than the "I think" comments?
Yes, the brokerage that has your account will tell you what they allow. If you really thought you would get an answer for your particular broker from an message board, well enough said.