It can be an interest free loan that you have to pay back over the time you stipulate.

Otherwise, you will have to pay about 30% in taxes to the Gov't.

Typically you can "borrow" up to 50% of the balance of your 401(k) account. However, this is not recommended except as a last resort, for two main reasons:

1) Not only does the loan bear interest, which is a little nervy considering the bank is "loaning" you your own money, you have to repay it with after-tax dollars. So when you take out a 401(k) loan, you are essentially losing the tax benefits that you got when you made the contribution in the first place.

2) If you quit or lose your job, the loan will most likely have to be repaid in full immediately.

Mine has about an 8% interest rate, and I can choose 1, 2 or 3 years to pay it back. It is paid out of each and every check. The interest goes back into my account, so I'm paying myself interest.

If I lose my job, I would have to pay the income taxes and 10% penalty fee on the amount I took out.

Also, I can only take half of my VESTED balance.

Anne S has the right answer, but one addition - you can borrow up to 50% of your balance OR $50,000 whichever is less. Also, if you've had outstanding loans before, the highest outstanding balance over the last 12 months is deducted from that $50,000.

Weird, I know.

In general, I would avoid taking a loan from your retirement assets unless you are in dire straits.