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For example, if you take out ,000 and you fall in the 25 percent tax bracket, you'll owe ,500 in taxes plus any early withdrawal penalties.
Though you will pay interest, you won’t pay taxes or penalties on the loan amount.
A few things to know about 401k loans: Sometimes it makes sense to take a loan from your 401k to cover the down payment, like if you’re getting an FHA loan and only need a small down payment.
Depending on your circumstances, you may be able to cash out early, but it could cost you extra when it comes to paying taxes if you're younger than 59 1/2 years old when you empty the account.
Even though it's your money, you can't always access the funds in your 401(k) plan.
This is because you can withdraw contributions at any time without penalty or tax.