A 401(k) loan is money investors can take from their 401(k)s to finance emergency or large expenses. The limit investors can take is $50,000 or 50% of their vested accounts, whichever is less.
What is a 401(k) loan?
Most investors pay their 401(k) loan quarterly, but options may differ between plans. Some investors may even be prohibited to contributing to their 401(k)s if they have an outstanding 401(k) loan. Investors will incur significant taxes and penalties if loans aren’t paid on time. Because these loans take money out of 401(k)s, investors may miss out on stock market returns.