This calculator will help you:
- See what happens to your 401(k) when you borrow against it.
- Figure out how much you would owe each month to repay the loan
Yep, you can borrow from your 401(k) alright. But is it really a good option?
For folks our age, we generally donít have a lot of money available in our 401 (k) to borrow. Especially since you are only allowed to borrow up to 50% of the vested amount. But, itís definitely an option to be aware of, and understand, so you can make the best decision possible for your situation.
- You can borrow up to 50% of your vested amount or $50,000, whichever is lower.
- If you repay on time, the loan is shielded from taxes and penalties.
- A typical rate is prime or prime plus one percentage point.
- You pay the loan and interest back to yourself.
- Most plans require you to pay back the loan in five-years.
- If you leave your employer (even if it's not your choice to leave), most plans require you to repay the outstanding balance within 30 to 90 days.
- If you cannot repay, your loan is considered in default and the government treats the outstanding balance as a taxable withdrawal.
- Some plans can charge a one-time fee, maintenance fee, or a combination of these.
Use this calculator to see how taking out a loan on your 401(k) can affect your retirement.