NASE Blogs

Can I Take A Loan From My 401(k)? [Ask The Experts Q & A]

Wednesday, January 11, 2012
Q: I read something several months ago about taking a loan from your 401K retirement plan. If you were at least 55 years old, you were not required to pay this back and there was no penalty for this. Is that true?

A: From a technical standpoint you still must repay the loan. If you don't repay the loan, regardless of how old you are, then the loan becomes a distribution. The tax treatment and potential penalties for such a distribution will then be dependent upon your age. The key point is whether a 10% penalty will apply to the distribution. If you are over 59 and 1/2 then no penalty will apply. If you are over 55 some exceptions to the penalty apply such as a distribution upon a separation from service, meaning that you no longer work there. Regardless, the distribution would be subject to ordinary income tax. For more detailed information please go to Publication 590 on the Internal Revenue's website at This publication includes much more information about early distributions and may help you more fully understand the consequences of your decision to borrow or withdraw from your 401k plan.

As always, NASE members can ask their tax questions to our tax professionals day or night by clicking here.

1 Comment

  1. 1 Dian Ardi 30 Aug
    The information is very good!


  1. RadEditor - HTML WYSIWYG Editor. MS Word-like content editing experience thanks to a rich set of formatting tools, dropdowns, dialogs, system modules and built-in spell-check.
    RadEditor's components - toolbar, content area, modes and modules
    Toolbar's wrapper 
    Content area wrapper
    RadEditor's bottom area: Design, Html and Preview modes, Statistics module and resize handle.
    It contains RadEditor's Modes/views (HTML, Design and Preview), Statistics and Resizer
    Editor Mode buttonsStatistics moduleEditor resizer
    RadEditor's Modules - special tools used to provide extra information such as Tag Inspector, Real Time HTML Viewer, Tag Properties and other.