Borrow from 401(k)

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Borrow from 401(k) Impact

A 401(k) loan means your balance stops compounding. See the opportunity cost and true net cost.

Inputs

Loan amount ($)

Loan interest rate (%)

Loan term (years)

Expected investment return (%)

Marginal tax rate (%)

Results

Opportunity cost (lost growth)

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Monthly payment

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Total interest paid (to yourself)

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Double-tax cost on interest

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Net cost of loan

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Value if left invested

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401(k) loan interest is paid with after-tax dollars but grows tax-deferred and is taxed again at withdrawal (the "double tax" effect). If you leave your job, unpaid balance may be treated as a taxable distribution. Max loan = 50% of balance or $50,000.