DEAR MARY: My husband and I just found out we're expecting our third child. We would like to add on to our home. My husband found out that he can take out a loan from his 401(k) at a super-low interest rate, then have the amount deducted from his paycheck every week to pay back the loan to his account. It sounds too good to be true -- and that's making me nervous. I don't want to jeopardize our future for an extra two rooms. He thinks I'm being too worrisome. Is he right? -- Doti, email
DEAR DOTI: Most 401(k) plans allow this, but the conditions can be severe. First, there's the matter of double taxation. The money in his account has never been taxed. Those are "before-tax" dollars. If he takes a loan, he will be repaying that money with "after-tax dollars." For every $1 he borrows he'll have to earn $1.28 or more to net $1.00 in his paycheck to repay the loan. Interest is on top of that. When he withdraws those same dollars in retirement he'll pay taxes on them again.
Then there's the matter of life's uncertainty. If he leaves his employer for any reason before the loan is repaid, the entire balance will immediately become due. If you can't do that, the loan balance will be converted from a loan to a cash withdrawal. He'll get socked with a 10 percent penalty, plus the IRS and state tax collector will be knocking on your door to collect taxes on that "cash withdrawal."
And if that's not enough, you must consider the potential loss of investment growth. Overall, borrowing from his 401(k) may be so troublesome this should be your last option, not your first.
DEAR MARY: You are my last resort! Please help. I bought a lovely cedar-lined wood chest at an auction about 10 years ago.
Unfortunately, I have not been able to use it for storage of anything due to the brutal smell of mothballs. Obviously, the former owner used them, and I cannot rid the chest of this terrible smell. When we first purchased it, we left it outside with the lid open for weeks and weeks. That didn't help at all. Can you suggest anything? -- Joanne, email
DEAR JOANNE: I'd like to wring the neck of the guy who invented mothballs in the first place. I'm with you. That odor is worse than moths. As for your problem, it's a tough one for sure.
The only thing I know that will get rid of that odor is a product called Nok-Out (NokOut.com), which has worked for me on various odors in wood.
Another option is to sand down all of the cedar lining with fine grit sandpaper.
Vacuum away all of the dust. This will renew the cedar fragrance. Hang in there. I know you'll find the solution. Just don't give up.
Do you have a question for Mary? Email her at firstname.lastname@example.org, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.
Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Cheaper. Better. Faster." just released in December 2012. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.