What is the Best Way to Borrow from 457 Retirement Plan?

[Jason Wutzke]

My Mom(63) has a 457 retirement plan that she would like to borrow $20,000 from with the intent of lending me the money so I can invest in my first real estate property. I want to make sure that the process is done correctly so that we don't pay more taxes or interest than is needed.

What is the best way to borrow the money?

What type of account should I put the money in while I am looking for a property?

Any other tips or suggestions would be greatly appreciated!

[Scott Vance]

@Jason Wutzke Your mothers 457 plan may have a loan provision that allows borrowing from the balance accumulated in your account. Plan loans, if allowed, are generally limited to 50% of your account balance or a maximum of $50,000, whichever is less, and generally must be paid back within five years with interest.  The key is whether the plan has a loan provision or not.  457's are not required to allow loans from their plans.  Also key to remember is there are significant penalties if you don't pay these loans back with in the 5 year repayment period.  Also keep in mind that if your mom is fired/retires or otherwise leaves her employer the plan will require her to pay the loan back within I think 30 days or the IRS deems that she has received a distribution and that is subject to taxes and penalties.