401(k): You may be able to take out a hardship loan against your 401(k) depending on the plan and if you're still employed by the employer that established it, says the IRS. Loans must be for less than half of the account balance or, at the most, $50,000. If the plan allows for loans, you generally may take out a five-year loan without penalty — provided you pay it back on time.
IRA: You can't take out a loan against your IRA, but may access money from your account for a 60-day period via a tax-free rollover. In other words, you may withdraw money from your IRA free of taxes and penalties if you return it to the same or a different IRA within 60 days. Should you fail to do so, the withdrawal is subject to income taxes and a 10 percent penalty if you're under age 59 and a half.
Determining whether a 401(k) or IRA is best for you may feel overwhelming at first, but knowing a bit more about their major differences can help make the process much easier.
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