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.

Eligible plans
The following types retirement plans may permit loans:

  • Defined benefit
  • 401(k)
  • SIMPLE 401(k)
  • 403(b)
  • 457 plans sponsored by government employer

The following types retirement plans may not permit loans:
  • IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 457 plans sponsored by tax-exempt organization

Loan rules
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

Related Articles
  1. Retirement

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  2. Retirement

    Sometimes It Pays to Borrow from Your 401(k)

    401(k) loans have been demonized, but they're often the most beneficial source of cash.
  3. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  4. Retirement

    5 Reasons Not to Borrow From Your Retirement Plan

    Your retirement plan should never be the first place to turn for a loan. Here's why.
  5. Retirement

    Borrowing From Your Retirement Plan

    Left with no alternative but to take money out from your retirement savings? Here are some guidelines.
  6. Financial Advisor

    The Pros and Cons of 401(k) Loans

    A look at the pros and cons of 401(k) loans.
  7. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  8. Retirement

    Should You Borrow From Your Retirement Plan?

    It makes sense to dip into your savings in some cases, but you must be aware of the potential consequences.
  9. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  10. Personal Finance

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
Frequently Asked Questions
  1. How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlation formula to correlate ...
  2. What is the Difference Between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ...
  3. Where Did the Bull and Bear Market Get Their Names?

    The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual (bear and ...
  4. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
Trading Center