What are the rules for taking loans from my 401(k)?
An example of an AI chatbot conversation about 401(k) loans and withdrawals.
What are the rules for taking loans from my 401(k)?
You can typically borrow up to 50% of your vested balance, but not more than $50,000. You must repay the loan within five years.
Are there any penalties for not repaying the loan?
Yes, if you fail to repay the loan, it may be treated as a distribution, leading to taxes and a possible 10% penalty if you're under 59½.
Can I withdraw money from my 401(k) instead of taking a loan?
Yes, you can withdraw funds, but it may incur taxes and penalties unless you meet certain conditions, like hardship.
What qualifies as a hardship withdrawal?
Hardship withdrawals can be for immediate and pressing financial needs, such as medical expenses, purchasing a home, or tuition.
How does taking a loan affect my retirement savings?
Taking a loan can reduce your retirement savings growth since the borrowed amount won't earn investment returns until repaid.
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