When borrowing from a 401(k) isn't a good idea

(Money Magazine) -- Q: My wife and I want to buy a home but can't put 20% down. Is borrowing from my 401(k) a good idea? Joe (last name withheld), Charleston, S.C.

A: It's not worth it. You'll be giving up any investment gains that might accrue before you repay the loan. Plus, if you change jobs, you'll have to return the money almost immediately or it will be subject to income taxes and a 10% withdrawal penalty. A better idea: Cut or stop new 401(k) contributions and save that dough for your down payment, says Chicago financial planner Mark Berg.

But if you're determined to buy now, try an FHA loan, which requires as little as 3.5% down. Yes, you'll have to pay mortgage insurance -- 2.25% of the loan amount upfront and 0.5% a year after that -- but you can cancel when you have more equity. In Charleston, you can borrow up to $335,000 through the program; go to fha.com for details.

-- Lisa Gibbs, senior writer

Q: I took a huge capital loss in 2008. Because I can carry over such losses every year, I may never pay taxes on capital gains again. Does this mean I can skip tax-advantaged accounts? Michael Chan, Jersey City

A: It's still smart to invest in tax-advantaged accounts such as Roth IRAs or 529 college savings plans even if their upfront tax benefits are small or nonexistent, says Baltimore financial planner and CPA Lyle Benson. That's because capital gains probably make up only a fraction of your investment income. Although you can offset future capital gains (and $3,000 annually of ordinary income) with carried-over losses, dividends and interest are still taxable. And those sources made up nearly 60% of securities-market income for filers in pre-crash 2007, the most recent year for which the IRS has published this information.

The silver lining of your losses: If you feel compelled to invest in high-turnover, actively managed funds, you'll get hit with little penalty-- at least when it comes to taxes.

-- George Mannes, senior writer

Q: Does it make sense to open a 529 plan in your current state if you know you will be moving out of state at some point? Ross Johnson Logan, Utah

A: In your case, it does. Your current state's plan offers both low fees and an income tax deduction (most states do). After you move, you'll need to decide whether to continue investing in Utah's plan or open a separate account in your new locale, says Mark Kantrowitz of Finaid.org. But you'll want to leave the funds you've invested up to that point where they are: While many states let you roll over your plan from one state to another without a penalty, Utah requires you to repay all of the income tax that you deducted on the account if you transfer the funds elsewhere. To compare tax benefit and fees on various 529 plans, go to collegesavings.org.

-- Beth Braverman, reporter