Retirement plan loan, or withdraw from a Roth IRA?

Forum|Forum|10 months ago
May 29, 2025
2 replies
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I need $10,000 to complete a kitchen model. My options, besides a bank loan of some kind, would be to withdraw contributions from a Roth IRA, or take a plan loan from my 403b, with a 5 year repayment schedule (that could be accelerated if I choose to make extra payments). (An HELOC is off the table, even though I would get a discount on the interest from the itemized deduction, because I want to avoid the hassle, paperwork, various fees, and don't want a loan on my credit report.)

I know what I think I should do, but I am curious for other opinions.

Bsch4477

Employee

Another option is credit card surfing. Assuming good credit, you can get a credit card which offers no interest charge for 15 months. If you can’t pay it all at the end of the 15 months you then get a credit card which allows a balance transfer with no interest payment required for some months hence. The risk is being approved for the second card and a charge on the transfer balance but that is usually much less than the interest charge from a bank.

dmertz

Employee

As long as you are diligent about paying off the loan such that you never cause a deemed distribution, a loan from the 403(b) makes more sense than making a Roth IRA distribution. If you have to, you can always take Roth IRA distributions later to be able to make the payments on the loan. Taking a distribution from the Roth IRA would permanently reduce the potential for tax-free growth in the Roth IRA.