How Many Loans Are Allowable Against 401k?

Companies offer 401k plans to their workers to help them save for retirement. With certain restrictions, the Internal Revenue Service permits loans from 401k retirement plans without incurring an early withdrawal penalty.

Features

You can take out as many loans as you want as long as the total of the loans does not exceed $50,000 or 50 percent of your account balance, whichever is smaller.

Considerations

Not all 401k plans permit loans. The IRS allows each plan sponsor to decide whether to make that provision available under the plan. According to Smart Money, most employers do permit loans from a 401k.

Warning

If you leave your job, even because you were terminated, you must repay the entire balance of your loan immediately, including multiple loans. If you cannot, the unrepaid amount will be considered distributed from your account.

References

• Internal Revenue Service: General Distribution Rules
• Smart Money: Tapping Your 401k Plan Before You Retire