457 Loan

[LearningMustachian72]

Hey!

I am considering borrowing roughly $40k from our 457 plan to help with some home improvement projects. We will be thoughtful with these and believe we will get solid return on the projects when we sell perhaps in 5-7 years.

I know the cons of double taxation and immediate repayment if terminated. Anyone have experience with this and if so, what were your terms (I.e rates, pay back period, etc)? I know all of this is determined by employer but just wondering what others were given.

Lastly, if I were to take an approved leave of absence when a child is born, any idea how that would be treated?

[LD_TAndK]

Is there any reason you can't save 40k over the next couple years then do the projects? Borrowing from retirement to fund home upgrades is some consumer sucka behavior.

Home improvement projects rarely provide more resale value than they cost, I wouldn't justify projects based on expected future returns.

[TimCFJ40]

I'd avoid borrowing from any sort of retirement vehicle.  While you do pay yourself back, you miss out on growth during that time.

I can't speak on the leave, but if you do make this move, make sure you get in writing from your HR department that they would not call the loan due in that case.

Finally, is this a few small to medium projects or one large $40k job?  Are you hiring the work out or is the $40k just materials?

We've done some medium to large renovations in the past by breaking them into smaller steps, paying for the materials out of our cash flow, and doing the work ourselves.  If you're reasonably handy, take your time, and hire out only the parts you have to due to lack of skill, you can save a boatload of money.