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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 we may need a little extra flexibility—whether it’s to purchase a home or just make things a bit 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 payments are collected electronically from your bank account on the first business day of the month. There is no early repayment penalty and you can get an estimated payoff amount in the InfoExpress Loan Center. For the exact loan payoff amount, contact Alerus at 800.433.1685.

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 loan from your RPB 403(b) account 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%. But unlike common bank loans, interest payments on RPB loans go back into your account, enhancing your retirement savings.

There is a one-time $100 loan application fee and an annual $50 maintenance fee (which is assessed quarterly). Both of these fees are non-refundable. RPB also charges a $25 late payment fee to cover our costs for processing missed payments due to insufficient funds or if you closed your bank account without notifying us.

If you're still working, you can continue to contribute towards your retirement while you're repaying your loan. We suggest you contribute at any level you're comfortable with so you won't miss out on growing your nest egg or the tax advantages you get from contributing to your 403(b) plan.

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

If you're married, make sure to include a notarized Spousal Consent form with your application. The form is also available in the InfoExpress Loan Center.

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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