Matthew Compton, managing director of retirement services at Brio Benefit Consulting, said most 401(k) plans also allow a participant to tap into their 401(k) balance without reaching a qualifying event such as a loan or hardship withdrawal. Typically, 50% of a participant’s total balance can be taken via a loan, with a maximum loan amount of $50,000.
“If loans are available, that is typically the better option as it allows the participant to borrow money from themselves and the interest on the loan is applied back to their own balance rather than paid to an outside financial institution,” Compton said.
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