Inside The Plan

What You Should Know About Taking a Loan from Your 401(k)

Apr 16, 2019

In this episode of Inside the Plan with the 401(k) Brothers, Bill Bush and Andy Bush, Advisors at Horizon Financial Group provide us some useful information regarding loans inside a 401(k) plan. Learn the positive and negative sides to pulling a loan from your 401(k), what the payback structure will typically look like, and what limitations are involved.

Show Notes:

  • 0:25--- Does your 401(k) plan even offer loans
  • 1:07--- What are the borrowing limits of your 401(k) plan
  • 2:48--- The payback on 401(k) loans starts right away
  • 4:01--- Will there be a credit check and interest on a 401(k) plan loan
  • 5:00--- Are 401(k) plans paid back post-tax
  • 5:39--- What fees are attached to setting up a 401(k) loan
  • 6:26--- What are some of the negatives of taking a 401(k) loan

3 Key Points:

  1. Find out if your 401(k) plan offers loans.
  2. The minimum loan size you can take is $1000 from 401(k) plans.
  3. The maximum loan size from 401(k) plans has an upper limit of $50,000.

Tweetable Quotes:

-       “If you do have a loan prevision inside your plan, there are certain borrowing limits that you need to know about.” – Bill Bush.

-       “If you are getting $1000, you are going to need just a little bit higher than $2000 invested balance in order to get that $1000, because there is a cost to processing the loan.” – Andy Bush.

-       “401(k) plans, 403(b)s, those are retirement plans and meant for the long hall and not to take a loan from unless you can absolutely help it.” – Bill Bush.

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