401k loan

[Account Closed]

Hello,

If you borrow from your 401K through an employer, is it typically 50% of the account balance that you can borrow or is it 50% of the employee's contributions?  In our case there are earnings and employer matching funds to be considered.  Thanks in advance for guidance.  

[Daren H.]

I have borrowed from my 401K and there are no penalties to doing this that I am aware of. I used the funds for a down payment on a rental property with no issue from my lender (not speaking for all lenders). This is my money that I am borrowing from myself and paying myself back with interest.  IMO, the money is no longer earning for me in my retirement account, but it is earning for me in the rental property. Plus it is cheap money! In regards to the concerns of risk, why do so many make the assumption that money invested in a 401k is some how safer or less risky? During the recent economic crash, there were a lot of people who saw their 401ks take steep drops in value they took a lifetime to build. I have far more control over the success of my rental properties (entry and exit) than I could every have over the mutual funds I am invested in. Furthermore, the rental properties are also for retirement :)

I do share the concern in regards to job stability or plans to leave your job because if you leave your employer, you will have to pay off the loan or you could get tagged with a distribution (penalties and taxes) depending on your plan.