Fidelity allows participants to have up to two outstanding 401(k) loans at any given time. A primary loan is capped at $50,000 or 50% of your vested account balance, whichever is less. A secondary loan can be taken out for an additional $50,000 or 10% of your vested account balance, subject to certain requirements. It’s important to remember that taking out a loan from your 401(k) means you’re borrowing money from your future retirement savings. While it can be a convenient way to access funds in the short term, it can also have long-term implications for your financial well-being.
Understanding 401k Loan Limits
The number of 401k loans you can have with Fidelity depends on your plan’s specific rules and limits. Generally, you can have up to two outstanding loans at any given time, with a maximum loan amount of $50,000 or 50% of your vested account balance (whichever is less).
- Loan Limit: The maximum amount you can borrow is typically $50,000 or 50% of your vested account balance, whichever is less.
- Number of Loans: You can generally have up to two outstanding loans at any given time.
- Repayment Term: You must repay your loan within five years or by the end of the tax year in which you take a distribution from your 401k account, whichever occurs first.
It’s important to note that taking out a 401k loan has both advantages and disadvantages. While it can provide you with access to funds for emergencies or large purchases, it also means that you are taking money out of your retirement savings. This can impact your long-term financial goals and potentially lead to tax consequences if you default on your loan.
If you are considering taking out a 401k loan, it’s important to weigh the pros and cons carefully and consult with a financial advisor to make sure it’s the right decision for you.
Types of 401k Loans
There are typically two types of 401k loans offered by Fidelity:
- Regular 401k Loan: A regular 401k loan allows you to borrow up to 50% of your vested 401k balance, with a maximum loan limit of $50,000. The loan term is typically 5 years, but it can be extended to a maximum of 15 years in certain circumstances.
- Hardship 401k Loan: A hardship 401k loan is available to participants who experience a financial hardship, such as medical expenses, tuition, or home repairs. Hardship 401k loans have more flexible repayment terms, and the loan amount is limited to the amount necessary to cover the hardship.
Loan Limits
Fidelity’s loan limits for both regular 401k loans and hardship 401k loans are as follows:
| Loan Type | Loan Limit |
|---|---|
| Regular 401k Loan | 50% of vested 401k balance, up to $50,000 |
| Hardship 401k Loan | Amount necessary to cover hardship expense |
Eligibility
To be eligible for a 401k loan from Fidelity, you must meet the following requirements:
- You must be an active participant in the 401k plan
- You must have at least $1,000 in your 401k account
- You must not have any outstanding 401k loans
- You must meet the requirements for a hardship loan, if applicable
Repayment Options for 401k Loans
There are several repayment options available for 401k loans. The specific options may vary depending on your employer’s plan:
- Equal installments: This is the most common repayment option. You will make equal monthly payments over the life of the loan.
- Level payments: These payments are designed to keep your total monthly payment the same, even if interest rates change.
- Accelerated payments: These payments are larger than equal installments and will help you pay off your loan faster.
- Interest-only payments: These payments will only cover the interest on your loan. The principal balance will not decrease until you start making principal payments.
- Lump sum payment: You can make a one-time payment to pay off your loan in full.
It is important to choose a repayment option that fits your financial situation and goals. Consider the following factors when making your decision:
- Your monthly budget
- Your long-term financial goals
- Your comfort level with risk
Here is a table summarizing the repayment options for 401k loans:
| Repayment Option | Description |
|---|---|
| Equal installments | You will make equal monthly payments over the life of the loan. |
| Level payments | These payments are designed to keep your total monthly payment the same, even if interest rates change. |
| Accelerated payments | These payments are larger than equal installments and will help you pay off your loan faster. |
| Interest-only payments | These payments will only cover the interest on your loan. The principal balance will not decrease until you start making principal payments. |
| Lump sum payment | You can make a one-time payment to pay off your loan in full. |
Eligibility Requirements for 401k Loans
To qualify for a 401k loan from Fidelity, you generally must meet the following eligibility requirements:
- Be an active participant in the 401k plan for at least one year.
- Have a minimum account balance of $500.
- Not be in default on any outstanding 401k loans.
- Have a demonstrated ability to repay the loan.
It’s important to note that loan eligibility requirements can vary depending on the specific plan document. You should consult with your plan administrator or Fidelity for the specific requirements applicable to your plan.
If you meet the eligibility requirements, you can borrow up to 50% of your vested account balance or $50,000, whichever is less. You can only have one outstanding loan at a time. The maximum loan term is five years. You can only take out another loan after you have repaid the previous loan in full.
There are several restrictions on 401k loans. You cannot use the money for certain expenses, such as paying off credit card debt. You must repay the loan on time or you may face tax penalties and fees. If you leave your job before you repay the loan in full, the loan may become due immediately.
Folks, that’s all she wrote for today’s deep dive into the world of 401(k) loans at Fidelity. Remember, knowledge is power, so use what you’ve learned wisely. If you’ve got any more burning questions, be sure to swing by again. We’ll be here with open arms and ready to dish out the financial wisdom. Until then, keep your money safe and growing! Cheers!