In my case, nope, it was against the "market value" of what I had in there, which was a mix of stocks and bonds. You don't have to sell those before you can borrow, and you're correct -- you are absolutely fucked during a downturn, because that reduces how much you are able to borrow, and if you've already borrowed, you can end up "underwater" on the loan, in which case you are on the hook for whatever the difference is between the current market value of (half of) your 401k account and whatever you haven't paid back yet. So this is a case where you would probably want to shuffle things around from unstable/risky securities (e.g., small- and mid-cap stocks) to more stable/slower-growth ones (e.g., bonds, maybe large-cap stonks if you're feeling lucky). But then that hurts your potential overall fund growth, which can screw you in the long run.
It's a mess, and if you can just forget it exists while still shoveling (employer-matched) money into it, you're better off leaving it alone. It's just another control mechanism for shackling you to a specific employer if you go down that rabbit hole. If you're union and plan on sticking around, fuck yeah, go for it. But if you're in a volatile field, don't dip in unless it's a serious emergency and you're out of other options.
Ah ok didn't know you could borrow against the stocks and bonds you have in there. I could use some of that to help buy an apartment. I guess I can call and check on my 401k to see if that's an option.
In my case, nope, it was against the "market value" of what I had in there, which was a mix of stocks and bonds. You don't have to sell those before you can borrow, and you're correct -- you are absolutely fucked during a downturn, because that reduces how much you are able to borrow, and if you've already borrowed, you can end up "underwater" on the loan, in which case you are on the hook for whatever the difference is between the current market value of (half of) your 401k account and whatever you haven't paid back yet. So this is a case where you would probably want to shuffle things around from unstable/risky securities (e.g., small- and mid-cap stocks) to more stable/slower-growth ones (e.g., bonds, maybe large-cap stonks if you're feeling lucky). But then that hurts your potential overall fund growth, which can screw you in the long run.
It's a mess, and if you can just forget it exists while still shoveling (employer-matched) money into it, you're better off leaving it alone. It's just another control mechanism for shackling you to a specific employer if you go down that rabbit hole. If you're union and plan on sticking around, fuck yeah, go for it. But if you're in a volatile field, don't dip in unless it's a serious emergency and you're out of other options.
Ah ok didn't know you could borrow against the stocks and bonds you have in there. I could use some of that to help buy an apartment. I guess I can call and check on my 401k to see if that's an option.