Can I Take a Loan from My 401(k)?

Many 401(k) plans allow participants to borrow money from their accounts, but it’s important to understand how 401(k) loans work.

• You must be an active employee to take a loan.

• Plans typically allow loans for any reason, though some restrict them to financial need.

• You can borrow up to 50% of your vested account balance, up to a maximum of $50,000.

• The minimum loan amount is usually around $1,000.

• Loans must be repaid within 5 years (longer for a home purchase).

• Payments are made through payroll deduction.

• You pay yourself back with interest, which goes into your 401(k) account.

• If you leave your job, the loan may become due immediately.

• Unpaid loans are treated as taxable distributions and may incur a 10% early withdrawal penalty if you're under age 59½.