Borrowing Money From A 401k, TSA Or Other Defined Contribution Retirement Plan
How To Take A Loan From Your Retirement Plan
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If you decide after considering the consequences and alternatives that you want to go ahead with a loan, the process is usually very simple.
Call the plan's customer service number. The representative will tell you how much you can borrow, at what rate of interest, with what fees, and what the monthly payment will be. The representative you speak to will then send you a promissory note for you to sign and return. (A Promissory Note is a legal document spelling out the loan to you, interest and when it's payable, the repayment terms, and often states what happens in the event of a default.)
If you need the money very quickly, ask the representative to fax or email the form to you. Also consider returning the form by an overnight service such as Federal Express or delivering it yourself if it goes to a local address.
Read all the documentation carefully, even the small print. If you have difficulty reading or understanding the documentation, have a qualified friend or family do it for you. Or reach out to a Financial Planner or an attorney. If money is difficult, perhaps your local disease specific nonprofit can direct you to a source to review the documentation with you.
Beware high "loan-processing" fees on 401K and other retirement plan loans. Fifty dollars may not sound like a lot, but on a $1,000 loan that's 5%, not counting the interest that will also be charged. If the amount you need is small, consider other options first.
Once you've returned the signed promissory note back to the plan, you should have your money in about a week.
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