How much can I borrow from my 401(k) and how is the limit set?

If your plan permits loans, the IRS caps the amount at the lesser of $50,000 or 50% of your vested balance. A special rule lets you borrow up to $10,000 even if that exceeds half your balance. The $50,000 ceiling is also reduced by your highest outstanding loan balance over the prior 12 months.

Not every plan offers loans, and some limit you to one or two at a time, so check your summary plan description. Repayment is typically through payroll deduction over up to five years, or longer if the loan is for a primary residence. Remember you are borrowing against your own retirement, so the opportunity cost of money out of the market can outweigh the convenience.