1. What is a 401k Loan?

A 401k loan allows you to borrow money from your retirement savings account. Unlike a withdrawal, you pay back the loan with interest, typically through regular payroll deductions.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Weekly interest rate (annual rate ÷ 52)
• \( n \) — Number of weekly payments
• \( PMT \) — Weekly payment amount (USD)

Explanation: The formula calculates the fixed payment amount required to repay the loan over the specified term, accounting for compound interest.

3. Importance of 401k Loan Calculations

Details: Understanding your repayment obligations helps assess affordability and impact on retirement savings. Interest paid goes back into your account.

4. Using the Calculator

Tips: Enter loan amount in USD, annual interest rate (typically prime + 1%), and repayment term in weeks. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are typical 401k loan terms?
A: Most plans allow loans up to 5 years (260 weeks) for general purposes, or up to 15 years (780 weeks) for primary home purchases.

Q2: What happens if I leave my job with an outstanding 401k loan?
A: The loan typically becomes due immediately. If unpaid, it's treated as a distribution subject to taxes and penalties.

Q3: Are 401k loan interest rates competitive?
A: Rates are often prime + 1%, making them lower than personal loans but higher than home equity options.

Q4: How does this affect my retirement savings?
A: While you pay yourself interest, the borrowed funds miss out on potential market growth during the loan term.

Q5: Are there limits on 401k loan amounts?
A: Maximum is generally the lesser of $50,000 or 50% of your vested account balance.