Yes, if the plan allows loans. The maximum amount an employee can borrow from a 401(k) plan generally is the lesser of 50 percent of the vested account balance or $50,000.
Every plan is different...
But some companies only allow employees to take out loans for specific reasons. Some companies also might have specific conditions under which they will allow the loan. For example, an employer may have a minimum loan amount, or a company might limit the total number of loans that can be outstanding at one time. If an employee is married, the employer may require the spouse’s consent to the loan.
An employee must pay back a loan in five years...
Unless he or she uses the loan to buy a home (a principal residence). In that case, the company may extend the loan based on its own discretion. 401(k) loans are not subject to taxes or penalties (unless the employee defaults or the loan otherwise violates the loan rules), but an employee does have to pay interest on the loan. The plan administrator decides what the interest will be, which is usually based on the current prime rate of interest. Unlike many other types of loans, the employee pays the interest to his or her plan account—not to a bank or other lender.
When can a participant begin drawing down a 401(k) plan?...
A participant can start drawing down a 401(k) plan, penalty free, once he or she is 59½ years old. A participant generally must start withdrawing the required minimum distribution (RMD) from a 401(k) plan by April 1 of the first year after the later of the calendar year in which the participant retires or reaches age 72. For example, if a participant reaches 72 years of age in February 2021, he or she doesn’t have to withdraw the initial RMD until April 1, 2022. If that same participant retires in May 2021, the plan may allow him or her to postpone the RMD until April 1, 2022. These rules and requirements apply to a Roth 401(k) as well.
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