Borrowing money from retirement plans is fraught with so many hazards that most people should look elsewhere if they need funds. Those who do borrow money should take care that their loan doesn't turn into an inadvertent withdrawal.

Credit Limits

  • Loans generally are limited to half of your balance or $50,000, whichever is less. They typically are repaid over five years at an interest rate slightly above the prime rate.

  • A missed payment or a job layoff can turn the loan into a withdrawal, triggering income taxes and penalties.

  • Money withdrawn from a retirement plan can't be returned, which means that every $1 you take out could potentially cost you $10 or more in lost retirement income.

Shopping Tips

  • If you decide to take out a loan, fix ...

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