How do loans or withdrawals work?
How do loans or withdrawals work?
Retirement plan loans and withdrawals are subject to plan rules and may not be available under every plan. Your plan may allow loans, hardship withdrawals, both, or neither.
Understanding your options
Before taking a loan or hardship withdrawal, it’s important to understand how it may affect your retirement savings, taxes, and future contributions. The rules and provisions for loans and hardship distributions vary by plan.
Loan vs. Hardship Withdrawal
|
Feature |
Loan |
Hardship Withdrawal |
|
Availability |
Only if the plan allows loans |
Only if the plan allows hardship withdrawals |
|
Repayment |
Must be repaid with interest to your account |
No repayment required |
|
Tax Implications |
Not taxable if repaid on schedule |
Subject to income taxes; early withdrawals may incur penalties |
|
Purpose |
Flexible use, but must follow plan limits |
Must meet IRS-defined hardship criteria (e.g., medical expenses, home purchase, tuition) |
|
Effect on Retirement Savings |
Reduces invested balance temporarily |
Permanently reduces account balance |
How to request a loan or withdrawal
- Contact your retirement plan’s service provider (Recordkeeper).
- Most providers allow you to model loan or withdrawal options online or over the phone before submitting a request.
- Submit the request via your account online or by calling participant services.
Need help deciding?
Reach out to our Financial Advocate team to review your plan’s specific rules and understand the potential impact on your savings. They can help you determine which option may be best for your situation.