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Need Some Cash?
You May be Able to
Borrow It From Your Retirement Plan
Many employer provided retirement plans offer
employees the option of taking a loan from their account. This can provide
some much needed cash for any number of purposes. However, there are a few
IRS rules to keep in mind.
If the plan allows the loan, you must repay it in full within five years.
An exception applies if the loan is for the purchase of your home. In that
case, the loan can be repaid over a longer period. No specific time limit
is placed on a home loan; however, the loan must provide for substantially
level amortization with payments to be made at least quarterly.
There are also dollar limits on the amount an employee may borrow.
Generally, the amount of the loan may not exceed the lesser of $50,000 or
one-half the present value of the employee's vested amount in the plan.
Plan loans that do not meet these requirements will be treated as a
distribution to you. Distributions from a retirement plan are generally
taxable and subject to an additional ten percent penalty if you are under
the age of 591/2, unless another exception applies. Check with your
employer first for the specifics regarding your particular retirement
plan.
(Tax laws do NOT allow loans from an IRA.)
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