Monthly Archives: August 2015

How much money can I borrow from my 401(k) retirement account?

Taking Money – 401(k) Retirement Plans

Have you ever come to a crossroads in life where you needed some extra funds? Maybe you asked a friend or family member for a short-term loan, opened a home equity line of credit, or – instead of borrowing – took on another job to increase your income.

One other option that some may not know about is the ability to borrow money from your 401(k) retirement account.

While not every 401(k) plan allows lending, the ones that do generally have very specific rules about the amount you can borrow – and for how long.

For most plans, the most you can borrow is $50,000 if you have invested $100,000 or more in the account. If the balance on the account is less than $100,000, then you are allowed to take up to 50 percent of the amount invested. For example, if you have $80,000 in your 401(k), then the retirement account enables you to borrow up to $40,000.

Expectations of Repaying the 401(k) Loan

When you withdraw money from this type of retirement account, you are generally expected to pay it back within five years. There are some exceptions, such as if you are borrowing the money to purchase a main home.

The benefits of this type of loan are that you are not taxed on the withdrawal unless you fail to pay back the money in the time specified. You are also sometimes paying the money back interest-free, so unlike a loan from your bank or credit card issuer that may assess a hefty interest rate, you essentially pay back exactly the same amount as you borrowed (again, as long as it’s paid within the timeframe). (Please note: if a loan is not paid back it is considered a taxable withdrawal and may incur a 10% early withdrawal penalty if under 59 1/2. )

Knowing When to Borrow

Of course, just because you can borrow the money does not always mean it is in the best interest of your overall financial plan. Before you take out a loan against a 401(k) retirement account, be sure you speak with your financial advisor about how it may affect your retirement savings or other big picture plans.  

Estate Planning: The Secret to Protecting Your Child’s Inheritance

 Secure Child’s Inheritance Money – Estate Plan Tips


If we sat down with you today, would you tell us that you want to leave an inheritance to your children?

Most clients who are interested in estate planning intend to leave their assets to their spouses and/or children, depending on the circumstances.

One thing that a lot of clients don’t think about is how an inheritance may be affected should their children go through a divorce or lawsuit. Both can have a profound impact on how much of the inheritance the child gets to keep.

Here’s what we mean:

Say your child is married and receives an inheritance outright from you, after you pass away. If the child puts the inheritance money into a joint account with their spouse, then the spouse may claim half of it should there ever be a divorce.

Same thing if your child is single when receiving the inheritance. If the money is then transferred to a joint account upon marriage, then you may end up with the same problem.

How about if your child is being sued? As long as the money is received outright, then the plaintiff’s attorney has every right to the funds.

How can you protect the inheritance from these situations?

Instead of setting up the estate plan so that children receive the money outright, you may consider arranging a trustee to set up a separate account upon your death, called a lifetime protection trust.

The lifetime protection trust puts the money into a specially designated account, so that the trust owns the money and not the child. (However, the child can be the trustee of the account.)

This way, if a divorce or lawsuit ever occurs, it may be significantly more difficult for exes and attorneys to get their hands on the money.

Approaching an estate plan from a cautious perspective could possibly save your children, or grandchildren, from losing the assets you worked hard to provide.