Should you borrow from a 401(k) or 403(b)?
The majority of 401(k) plans and a growing number of 403(b) plans let you borrow money from your account. Use this calculator to help you determine if you should borrow, and the potential impact on your retirement savings.
How the should you borrow from a 401(k) or 403(b)? calculator works
It compares the market growth the borrowed money would have earned against the interest you repay to your own account, with the difference being the true net cost of the loan.
Worked example: with loan amount of $25,000, loan interest rate of 8.00% and repayment term (years) of 5, the should you borrow from a 401(k) or 403(b)? shows net cost of borrowing of $6,319.
- Growth you’d miss
- $11,733
- Interest paid to yourself
- $5,415
- Net cost
- $6,319
- Loan payment
- $506.91
The formula
Net cost = foregone market growth − interest repaid to yourself, where foregone growth = amount × (1 + market return)^years − amount.
Results are estimates for educational purposes and are not financial advice. Confirm exact figures with your lender, plan administrator or advisor.
Questions about the should you borrow from a 401(k) or 403(b)?
Is borrowing from my 401(k) a good idea?
It can be cheaper than other loans since you repay interest to yourself, but the borrowed money misses market growth — the real cost. It is best for short-term needs, not a habit.
What is the biggest risk of a 401(k) loan?
Leaving your job. The balance often becomes due quickly, and if you cannot repay it, the unpaid amount is treated as a taxable distribution — with a 10% penalty if you are under 59½.
When might it make sense?
For a short-term, essential need when you are confident in your job stability and can repay quickly, and when the alternative is high-interest debt. Weigh the foregone growth first.
Is the Should you borrow from a 401(k) or 403(b)? free to use?
Yes. Every calculator on FinCalculators is completely free, with no sign-up, login or paywall. You can run as many scenarios as you like.