401(k) Loan

A 401(k) loan is money investors can take from their 401(k)s to finance large or emergency expenses. Investors are limited to borrowing $50,000 or 50% of their vested accounts, whichever is less.

Most investors repay their 401(k) loan quarterly, but options may differ between plans. Some investors may even be prohibited from 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. Taking money out of a 401(k) also puts investors at risk of missing out on stock market returns.