Generally, borrowing from a 401(k) plan is not a good idea; you have to withdraw more than you need to cover withdrawal fees, and the amount may be subject to taxation. Withdrawing even a small amount will also lead to a significant reduction in the total amount years down the line.
How Much Can You Borrow From Your 401(k) Plan? FAQs
A 401(k) plan is a retirement plan offered by an employer designed to help employees save for retirement.
Generally, borrowing from a 401(k) plan is not a good idea; you have to withdraw more than you need to cover withdrawal fees, and the amount may be subject to taxation.
You may use the loan proceeds for any purpose, including home repairs, medical expenses and educational costs.
Yes, most plans charge a loan origination fee which is generally deducted from the amount of the loan and repaid to the plan as part of your loan payments.
Generally, you must repay it within five years (in equal monthly payments). However, if the loan is used to purchase your primary residence, you may be able to extend the repayment period up to 15 years.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.