You already know you shouldn’t tap your retirement plan to fund frivolous purchases, yet in a handful of cases it just might be okay to take a loan. Retirement plans account for a large chunk of personal wealth and in order to get the most out of your retirement plan, you should let the money accumulate over the course of your career. But, sometimes, emergencies will call for the more drastic step of taking a plan loan. Here’s how to borrow from your 401(k) without ending up with a big tax bill.
Depending on whether your plan permits borrowing, you’re generally allowed to take up to 50 percent of your vested account balance to a max of $50,000, whichever is less. You have five years to repay the loan.
Your plan administrator will withhold 20 percent of the amount to cover income taxes and you’ll trigger a 10 percent … Read More