401k loan model
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Option 1: 401(k) loanOption 2: 3rd-party loan
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Cash401(k)Taxes paidCash401(k)
Loan originator
Taxes paid
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2016/01/01Year's wages$100,000Year's wages$100,000
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2016/01/02401(k) contrib-$18,000$18,000401(k) contrib-$18,000$18,000
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2016/12/31Pay taxes-$14,760$14,760Pay taxes-$14,760$14,760
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EOY balance$67,240$18,000$14,760$67,240$18,000$0$14,760
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2017/01/01Year's wages$100,000Year's wages$100,000
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2017/01/02Take out loan$10,000-$10,000Take out loan$10,000-$10,000
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2017/12/31Pay taxes-$18,000$18,000Pay taxes-$18,000$18,000
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EOY balance$159,240$8,000$32,760$159,240$18,000-$10,000$32,760
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2018/01/01Year's wages$100,000Year's wages$100,000
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2018/01/02Repay loan-$10,000$10,000$0Repay loan-$10,000$10,000$0
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2018/12/31Pay taxes-$18,000$18,000Pay taxes-$18,000$18,000
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EOY balance$231,240$18,000$50,760$231,240$18,000$0$50,760
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2027/01/01Withdraw 401(k)$18,000-$18,000Withdraw 401(k)$18,000-$18,000
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2027/12/31Tax on distribution-$3,240$3,240Tax on distribution-$3,240$3,240
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EOY balance$246,000$0$54,000$246,000$0$0$54,000
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