Are there benefits with IRA over 401k.Would it be wise to use 401 loan to fund IRA loan and payment are pretax

Answer 1

The first question is whether the IRA contribution will be deductible to you. In 2006, if your AGI exceeds $75,000 (married) or $50,000 (single), the deductible contribution to IRAs starts to phase out. Don't do it if it isn't deductible.

Next, how fast can you pay back the loan? Generally, a long-term loan, even to yourself, is not going to help you because the interest is not deductible.

Finally, would taking a 401(k) loan stop you from making 401(k) contributions? Don't do anything that would stop that, and blow your employee match.

Answer 2

A 401(k) will allow you to put away up to 6% of your salary while IRA's have a maximum dollar amount ($4000 for 2005). There are IRA that do not have a current tax affect (Roth IRA) but will be advantageous when you retire.
Why would you borrow money from your 401K to fund an IRA?

Answer 3

IRAs generally have many more investment options than 401Ks. That is their advantage.

Answer 4

401K is usually provided through your employer, and most companies match at least part of the funds you put up. In my case I put in 6 percent and my employer contributes 4 percent.