I am considering taking a loan from my qualified retirement plan. What is the definition of a "reasonable interest rate"?

By Denise Appleby AAA
A:

For the purposes of a qualified plan loan, the reasonable rate of interest that the Department of Labor provides is one consistent with rates charged by commercial lenders. To apply a reasonable rate to your qualified plan loan, a plan administrator will typically survey a few financial institutions to get a general idea of the interest rate on a particular type of loan. For example, assume that the purpose of your loan is to buy a home. Your plan administrator would use a rate that is comparable to the rates used by commercial lending institutions for mortgages.

(For more information on borrowing from qualified plan loans, see Borrowing From Your Plan.)

This question was answered by Denise Appleby
(Contact Denise)

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