Self Made: NASE's Blog

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 www.irs.gov. 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.

2 Comments

  1. 2 Dian Ardi 30 Aug
    The information is very good!
  2. 1 asd 14 Feb

    The procedure of applying for a same day loan is very simple and involves filling out an application form available online. You need to provide personal information, as well as bank details required for the cash to be deposited into your account. Filling out an application and submitting it takes a few minutes, while processing the application may take a few hours.

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Self Made

A blog on the self-employed and micro-business

Meet the NASE Staff Bloggers


Katie Vlietstra - As Vice President for Government Relations and Public Affairs, I work to explain how actions on Capitol Hill can impact the self-employed. I love D.C. and have made my home in Capitol Hill, where I live with my husband and black Labrador, Coltrane. We love playing volleyball and softball on the National Mall. 

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