When do retirement loans make sense?

I looked at the details of my former employer's 401k loan program years ago. There was a 75 dollar origination fee..... bad start. And upon termination or separation the full loan balance was due in a short period of time. There are simply too many negatives. I have never heard a good case for them.

Simply allocate more of your next and future paycheck to your debt payoff. Lower your 401k contributions to the minimum to get the full match. As the debt goes away up your 401k contribution again. Much more simple and no fees.

You need to remember that in most (maybe all?) cases you cannot contribute to a 401(k) which has an outstanding loan. The loan must be repayed before new contributions can resume. And you have a time limit to repay before you are hit with an early withdrawal penalty. Also, you withdraw money which will be taxed, and you repay the loan with after tax dollars (so you lose the tax benefit of the tax deduction on the original contribution).

Let's take an example. Suppose you are in the 20% tax bracket and you withdraw $1000 from the 401(k). You will have to pay the 20% tax (when you next file your taxes), and then you end up with $800. Assuming you pay back the money within the time limit (I'm not sure what the official limit is, but you can probably find that info online), you will have had to put in $1000. To have $1000 you can put in, you will have to have earned $1200. If you are in a position where you will have enough gross earnings within the time window (before the additional penalty hits) that it will amount to 50% more than you took out at the start, you are almost certainly better off not taking the loan.

So, the 401(k) loan is something to maybe use in the scenario where the option is something like your family ends up destitute and on the street. And probably not any other reason, IMHO. If at all possible, you are way better off just pausing all retirement contributions and savings and just putting as much as you can to pay down the debt as quickly as possible. Unless the debt has an astronomically high interest rate, that will be the mathematically and psychologically superior solution practically every possible scenario.

There is also the opportunity cost of the contributions being out of the account.

For the Roth IRA, that's a much different scenario. You've already paid the taxes, so there is no tax to pay. And there is no penalty if the account has been opened for more than 5 years (assuming it is a genuine contribution and not a roll-over or conversion, in which case it is 5 years from the date of roll-over or conversion). There is also no repayment option. Once the money is out of the Roth IRA, it is out for good. So the only consideration is the opportunity of that money no longer being able to grow tax free. Like with the 401(k), I would avoid pulling the money out of a Roth IRA for debt repayment. That math is less bad than for the 401(k), but it still isn't good.