How Do You Withdraw Money From 401(K)?
Did you know you can withdraw money by taking a loan from your retirement plan? It becomes very tempting to want to take a loan from your retirement plan if you see that the money is piling up year after year and you are in desperate need for cash. Most employer’s retirement plans allow you to take a loan from the retirement plan and these helpful hints show you the rules and the pros and cons of taking a loan. First, learn the rules of withdrawing money by taking a loan from your 401(k). According to federal law, individuals can take up to 50% of the vested balance of their 401(k) or up to $50,000 maximum from their 401(k). Some plan sponsors have a minimum loan amount to borrow. In addition, the loan terms usually are 5 years, and in the case of borrowing for a house the loan terms can be longer. When you borrow money from your retirement plan, you sign a loan agreement that spells out the principal of the loan, the term (or time period for payback) of the loan, the interest rate, an
