401(k) Loan vs Hardship Withdrawal
A **401(k) loan** lets you borrow from your balance and repay yourself (with interest). A **hardship withdrawal** removes money permanently and may trigger taxes and penalties if you are under 59½.
Step by step
1. Confirm plan rules
Not all plans allow loans or the same hardship reasons.
2. Model repayment
Leaving your job can accelerate loan balance due dates.
3. Count opportunity cost
Missed market growth while funds are out can exceed stated interest.
Loan vs hardship
Loans preserve retirement compounding if repaid; hardships are a last resort.
- Loan: Repay with interest to yourself; limits typically $50k or 50% vested.
- Hardship: No repayment; may owe tax + 10% penalty if under 59½.
Use our calculators
Common mistakes
- Borrowing without emergency fund
- Hardship for non-qualifying expenses
FAQ
Is a 401(k) loan taxed?
Not when borrowed—default or unpaid balance can become taxable distribution.