How Much Will Borrowing Cost You?

The NCPA's 401(k) Borrowing Calculator can help you determine how much a 401(k) loan will cost in terms of lost savings and investment opportunities. The calculator will:

  • Make annual comparisons of your projected 401(k) balance, with and without a loan, from the year you borrow until the year you retire.
  • Compare your monthly income when you retire, with and without a loan, based on a 30-year fixed annuity.

    • Place your cursor over each box for further explanation of the variable fields.

    What may my 401(k) be worth?
    Enter your 401(k) account balance prior to loan withdrawal.

    Enter the amount of your monthly contribution prior to the loan.

    If you do not enter an amount, your contribution will equal your regular monthly contribution minus your loan payment if the value is positive.

    Enter the amount of your monthly employer match, if any, prior to the loan. No employer matches are made until the loan is repaid.

    Enter amount of employer contribution during loan period.

    Enter expected annual rate of return on your 401(k) account. The annualized growth rate of the S&P 500 Index since 1975 is 9.71%.

    Enter the loan amount. Borrowers may borrow up to half of their 401(k) balance, not to exceed $50,000.

    Enter the loan interest rate. Borrowersare typically charged a rate equal to the prime rate plus 1 percentage point. the prime rate May 2008 is 5 percent.

    Enter the loan duration. maximum loan period is 15 years (180 months) for home purchases and 5 years (60 monyhs) for other types of loans. Assume the loan is paid in equal monthly payments with a 2-month lag before payments begin.



    Year by year values
    Year 401k Value (No Loan) 401k Value (With Loan)
    0 20,000.00 20,000.00
    1 34,579.52 17,185.48
    2 50,639.45 24,492.16
    3 68,330.10 38,919.41 Loan Paid Off
    4 87,817.06 55,420.01
    5 109,282.73 73,596.08
    6 132,928.03 93,617.75
    7 158,974.27 115,672.42
    8 187,665.25 139,966.53
    9 219,269.51 166,727.46
    10 254,082.87 196,205.69
    11 292,431.18 228,677.15
    12 334,673.38 264,445.77
    13 381,204.85 303,846.32
    14 432,461.14 347,247.62
    15 488,921.99 395,055.88
    16 551,115.88 447,718.60
    17 619,624.94 505,728.70
    18 695,090.41 569,629.14
    19 778,218.65 640,018.04
    20 869,787.74 717,554.23
    21 970,654.76 802,963.45
    22 1,081,763.83 897,045.13
    23 1,204,154.91 1,000,679.86
    24 1,338,973.60 1,114,837.68
    25 1,487,481.78 1,240,587.08
    26 1,651,069.49 1,379,105.09
    27 1,831,267.90 1,531,688.23
    28 2,029,763.68 1,699,764.66
    29 2,248,414.73 1,884,907.59
    30 2,489,267.61 2,088,849.94 Retirement
    Annuity income during retirement
    Year 401k Value (No Loan) 401k Value (With Loan)
    0 20000 20000
    30 2,489,267.61 2,088,849.94

    Monthly income during retirement from 30-year fixed annuity with a 5 percent rate of return.

    No Loan With Loan Loss Per Month Loss Per Year
    13,362.93 11,213.40 2,149.53 25,794.34

    All calculations in current dollars (not adjusted for inflation).

    This calculator is for informational purposes only. It should not be construed as financial or investment advice. Results of borrowing losses will vary based on market rates of return.