I keep reading that a 401K loan is considered as borrowing from yourself. If you are making payments on the loan from your paycheck, it appears that you are borrowing from yourself since the payment is applied to the fund you took the loan from plus the interest. In the case of being terminated from that employer, you no longer have payments taken from your paycheck and now must pay the loan back in full within 90 days. You pay back the loan in full but the payment can no longer be re-invested from the fund you borrowed from so now it no longer appears that I am paying myself back. Who keeps the pay off amount?
It cannot be invested in a "fund" because you will no longer be in the former employers 401K program after termination. The repayment simply remains in cash. You need to roll the 401K into an IRA and then invest in whatever you choose.
The money that was loaned to you came from cash holding within the employers 401K. That is why you were not required to sell any positions when you took out the loan. When you failed to repay the loan prior to termination, the employer needed to sell some of your stock to repay the remaining balance.
No it didn't, according to my financial statement, they sold units in order to give me the cash. This amount was subtracted from my Dow Jones vested balance.
