Read your retirement plan before borrowing from it
Most types of retirement plans (including 401(k), profit-sharing and 403(b) plans) are permitted to offer loans.
However, before you decide to take a loan from your retirement plan, consider what may happen if you:
• can’t repay the loan according to its terms, or
• leave your job before repaying the loan in full Not repaying the loan Your plan administrator will report the unpaid loan balance as a distribution to you and you must:
• include any previously untaxed amount of the distribution in your gross income, and
• pay an additional 10 percent tax unless you are over 59½ years old or qualify for another exception
Leaving your job If you quit, retire or are terminated, your plan administrator may require you to repay the outstanding amount of the loan in full at that time. Otherwise, the outstanding amount is:
• deducted from your retirement account balance, and
• treated as a distribution to you (see above), but you may be able to roll over the amount of the distribution and avoid any taxes Remember, your plan is designed to help you save for when you retire, so be careful before borrowing from it now.