Question

Justin has a 401(k) with his employer; the plan allows loans. Justin wants to borrow the maximum amount from his 401(k). He has a vested account balance of $80,000. How much may he borrow from the plan?

a.) $40,000
b.) $80,000
c.) $50,000
d.) $20,000

Answer 1

Justin may borrow a maximum amount of $40,000 from his 401(k) plan.

Step-by-step explanation:

In order to determine how much Justin may borrow from his 401(k) plan, we need to first understand the rules and limits imposed by the plan. Typically, a 401(k) plan allows participants to borrow up to 50% of their vested account balance or a maximum of $50,000, whichever is less. In this case, Justin has a vested account balance of $80,000. Therefore, he may borrow up to 50% of $80,000, which is $40,000, as the maximum amount he can borrow from the plan.