This what happens if you have a 401(k) loan and lose your job
13% of 401 savers have an outstanding loan, according to Vanguard's 2019 How America Saves report.
, loans that already have been in repayment are subject to some existing rules that apply when you're laid off or otherwise part ways with your company. In other words, your loan could morph into a distribution that comes with taxes and an early withdrawal penalty. As the coronavirus pandemic continues running roughshod over the U.S. economy and job losses continue to mount, some workers may hit the unemployment line with a 401 loan in tow. Vanguard's 2019 How America Saves report shows that 13% of 401 savers have an outstanding loan.
Federal law allows workers to borrow up to 50% of their account balance, with a maximum of $50,000 . The loan is tax-free and, unlike with most outright distributions, there is no early withdrawal penalty of 10% if you're under age 59½.
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