Most retirement plans allow individuals to take a loan up to 50% of the account balance, or $50,000 – whichever is less. For most loans, you’ll have up to five years to repay it, with the exception of borrowing from a 401k plan to buy your first home, which offers a longer repayment term.
Generally, there is no early withdrawal penalty imposed for borrowing money from your retirement plan, whereas taking a hardship withdrawal is considered an early distribution and results in a 10% penalty. If you have to choose between a loan and a hardship withdrawal, always go with the loan to avoid that penalty.
If you decide to take a loan from your retirement plan, follow the steps below:
- Request/complete/return loan application to us
- Once processed and approved (usually within 48 hrs) you will receive a promissory note outlining the terms of repayment to be signed and returned to us.
- When the promissory note is received, we will coordinate with the fiduciary to have the funds delivered to you. Be aware time to receive an actual check may vary depending on type of investments involved. Normal times are 3 to 5 business days.