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Loans

Borrow from yourself instead of a bank

Your retirement savings may be available to help you before you reach retirement. Sometimes the demands of modern life make managing finances tricky and some of us may need a little extra flexibility—whether it’s to purchase a home or just make things a little easier.

To help in those situations, you can take a loan from your RPB 403(b) account, for any reason, if you’ve:

  • Been enrolled in RPB’s retirement plan for at least one year
  • And have $2,000 or more in your 403(b) account.

Details, benefits, and requirements

You have up to five years to repay a general purpose loan, and up to ten years for a residential loan. Loan repayments are made monthly as automatic electronic payments from your bank account. There is no early repayment penalty. Contact Alerus at 800.433.1685 for an exact loan payoff amount.

The loan amount can be between $1,000 and $50,000 (or 50% of your 403(b) account balance, whichever is less). And you can only have one outstanding RPB 403(b) account loan at a time.

RPB 403(b) loans are charged a fixed interest rate equal to the prime rate published by the Wall Street Journal as of the loan date plus 1%. And there is a one-time $100 loan origination fee and an annual $50 processing fee, both of which are non-refundable. But unlike common bank loans, interest payments on RPB loans go back into your account, enhancing your retirement savings.

Loan payments are made electronically, and there is no early repayment penalty. You can get an estimated payoff amount in the Loan Center. Contact Alerus at 800.433.1685 for an exact loan payoff amount.

Participants can refinance a loan once during the loan term to increase the loan amount, extend the length of the loan, or both within the maximum limits of the loan amount and term. Loans may not be refinanced to change the loan interest rate.

If you’d like to provide specific allocation instructions, call Participant and Employer Services at 212.681.1818 for assistance.

Include a notarized Spousal Consent form with your application.

If you have no emergency fund, a 403(b) loan could be a good backup plan.

The interest is far lower—and you’re paying it to yourself rather than to a third-party. We recommend saving three to six months worth of expenses outside of your retirement account to use as an emergency fund.

Ready to apply for a loan from your RPB account?

Once you understand the implications of taking a loan from your retirement account, you can get started by logging in to InfoExpress and clicking Loan Center. From there, select Model a New Loan to find a manageable monthly payment.

Important considerations

While borrowing from your RPB 403(b) account may be a better option than taking out a loan from a credit card or commercial institution, it’s important to factor in the potential drawbacks before applying.

Lost Growth

Borrowing from your 403(b) may mean less money in retirement. Even though you’re repaying yourself, you’ll lose tax-deferred growth on that money and tax-free growth on Roth contributions—savings you’ll need to live on for 20 to 30 years when you’re retired.

Costly to Default

Defaulting on a retirement loan may result in the loan being reclassified as an early retirement distribution, which may be subject to taxes and an additional 10% penalty if you’re under 59½.

Difficult to Increase Contributions

If you're focused on paying back your loan, you may be less likely to increase your contributions, which is a key factor in reaching your retirement savings goal.

Have a serious financial need prior to retirement, but don’t want to take a loan?

You may qualify to take a hardship withdrawal from your 403(b) account. But make sure you carefully consider the risks and requirements.

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