Loans vs withdrawals

Some plans allow you to borrow money from your retirement account in the form of a loan. Unlike a withdrawal a loan allows you to pay your account back with interest.

With a withdrawal you have to consider:

  • Taxes and early withdrawal penalties
  • Loss of the money that could have grown from keeping the money in your account
Here’s a hypothetical example of a withdrawal against your retirement plan:  
Let's say you are 45 years old and want to take $25,000 out of your retirement account to renovate your home.
Triangle Alert
You'll pay a 10% early withdrawal tax in addition to the 22% tax.
Cash Down
So, your $25,000 is reduced to $17,000, costing you $8,000 in taxes.
A loan might be better
For these reasons shown above, a loan may be a better option. If you decide you need to take a loan, talk to your plan to see how much you’re eligible to take. Then over time you can pay yourself back with interest and reduce the impact on your long-term account balance.
Neither Nationwide nor its representatives give legal or tax advice. Please consult your attorney or tax advisor for answers to your specific tax questions.