When can i borrow from my 401k?

30th Oct 2009 by Joseph Pousada

Many 401k plans do allow you to borrow against your loan and you should contact your plan administrator to find out what your options are, any special conditions and what the interest rate would be. Many plans will allow you to borrow up to 50% of the market value of your 401k retirement account and will charge you a fixed rate of interest. It is important to review this option with your financial advisor as this may impact your investment strategy. Sometimes the plan will liquidate assets to provide you the loan and the payments you make (including interest) go back into the 401k plan to pay back the loan. As these payments are made the funds are used to purchase shares in the percentage allocation you have assigned for your investment contributions. This would have an impact on the average cost basis of the investments you are making and depending on the size of the loan could significantly impact your asset allocation.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com