The Five Downsides of a 401k Loan

A 401k loan is tax and penalty free if you follow all the rules, but it's not interest free. The second downside of a retirement account loan is that your payments get deducted from your paychecks. Missing a payment means your entire outstanding balance could be considered an early withdrawal subject to taxes plus a hefty 10% penalty. And the sixth downside is you have less protection from creditors. But having money in a retirement plan at work gives you some unique financial protections.