Agent Owner, Gilmore Insurance Services, Marysville, Washington State
How much can I borrow from my retirement plan? Now if I could flick your ear like your dad used to do, I would say "why would you want to?" Just because a loan provision can be included within your plan, it doesn't mean you should exhaust EVERY other possibility first. Borrowing from your retirement plan is far and away the last possible choice to make. That said...
The limits for loans can be set by your plan. Borrowing provisions can be set up by your plan. Payback interest rate is set up by your plan. Your plan advisory board will decide if a loan request has merits. Usually the money you take from your plan is no longer participating in plan returns, so if you're investment is earning 10% and your loan payback provision is 4%, you're making 4% on your money. If you get laid off or quit your job, your loan from your retirement plan is "called" immediately. Failure to pay it back when called results in a "premature distribution" which makes your "loan" income, along with a penalty, so your income taxes could change considerably.
Try to remember just because a feature is available, doesn't mean you should use it.
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The limits for loans can be set by your plan. Borrowing provisions can be set up by your plan. Payback interest rate is set up by your plan. Your plan advisory board will decide if a loan request has merits. Usually the money you take from your plan is no longer participating in plan returns, so if you're investment is earning 10% and your loan payback provision is 4%, you're making 4% on your money. If you get laid off or quit your job, your loan from your retirement plan is "called" immediately. Failure to pay it back when called results in a "premature distribution" which makes your "loan" income, along with a penalty, so your income taxes could change considerably.
Try to remember just because a feature is available, doesn't mean you should use it.