I guess this could be a cautionary tale, but I am hoping it can be remedied.

I had a job that I am leaving, but I had took a 401k loan to put down on a house. I don't have the money to pay it back so my idea was this.

Borrow the balance that I owe from a bank, roll over the replenished 401k to an individual 401k (through LLC I am establishing) and then take another 401k loan out again and then pay of the bank loan. Can I open a individual 401k if I also have a full time job and the LLC will be on the side? Any funds I contribute to the individual 401k will be after taxes.


Take the tax hit.

  • I'm a very similar situation. I can pay back most of it, but would deplete my savings to do so. I'm wondering if I can roll over to an IRA and borrow against that? Oct 21, 2013 at 14:47
  • 1
    You can't do it via a IRA unless you are going to fake some house purchase, I chickened out on that because I don't want anyone I know to compromise themselves possibly or having IRS chase me. Do an LLC, open a individual 401k with etrade and voila.
    – arinte
    Nov 12, 2013 at 11:52

1 Answer 1


The first step is to contact the company you are considering using as an administrator. Ask if they have a loan provision. For what it's worth, I looked at Schwab, and it seems to indicate they do not offer loans against this type of 401(k). That doesn't mean no one does, just that you may need to look around.

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    I have found sharebuilder, etrade, and merrill lynch offers a 401k loan for indivduals.
    – arinte
    Sep 6, 2011 at 17:01
  • So you've done the research already? That's great. You can have an employer 401(k) at the same time as the individual. Your total deposit is still subject to the $16500 limit, plus profit sharing or matching. Sep 6, 2011 at 18:00
  • For others, I did this using etrade after I setup a LLC. It was fairly painless, just wish I knew this a long time ago.
    – arinte
    Nov 12, 2013 at 11:50

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