Qualified plans and certain other employed-sponsored plans may permit participants to borrow a portion of the assets held in their accounts. These loans must meet certain conditions to avoid early withdrawal penalties and ordinary taxation.
The following types retirement plans may permit loans:
- Defined benefit
- SIMPLE 401(k)
- 457 plans sponsored by government employer
The following types retirement plans may not permit loans:
- SEP IRAs
- SIMPLE IRAs
- 457 plans sponsored by tax-exempt organization
There are strict conditions on loans from eligible retirement plans. These conditions include:
- Loan amounts must be the lesser of:
- $50,000 (reduced by excess of highest balance of outstanding loan in one-year period before new loan minus outstanding balance on date of new loan).
- Half the present value of vested balance (but not less than $10,000).
- Loan must be repaid within five years (except for loans to acquire main home).
Other Tax-Advantaged Retirement Plans
Retirement401(k) loans have been demonized, but they're often the most beneficial source of cash.
Financial AdvisorA look at the pros and cons of 401(k) loans.
Personal FinanceA loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
Personal FinanceNot all student loans are the same. Know what you're getting into before signing on the dotted line.
Personal FinanceA loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
Personal FinanceHow to tell whether a personal loan or a car loan is better for you.
Managing WealthYou never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
RetirementFind out why dipping into your 401(k) can have serious consequences.
Personal FinanceAttempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
Personal FinanceDirect PLUS loans are heavily advertised to parents who want to help support the financial costs of their child's education, but are they a good idea?