I changed employers and am unable to pay back my 401(k) loan within the 60-day period allowed. I realize this will default the loan and I will receive a 1099-R, have to pay taxes and penalties. The rub is that I will have money sufficient to cover the loan about a month AFTER the 60-day period. I checked with the plan administrator, and they are unable to extend the period of the loan. Are there any steps I can take to help myself tax-wise, like making a large retirement fund contribution before April 15? If so, am I hedged in by the catch-up contribution amount of $6,000? I'm over 50. Kind regards for your advice.

  • How much will you be short on the loan?
    – Ben Miller
    Jan 28, 2016 at 20:58
  • Do you have an IRA?
    – user102008
    Jan 28, 2016 at 21:08
  • A lot - 21k short. I do not have an IRA but understand I can start one and contribute $6,500 before 4/15 and it will count toward my 2015 taxes?
    – Crystal
    Jan 28, 2016 at 21:25
  • 3
    This is one of several reasons a 401(k) loan should be a Last Resort. It really isn't as good a deal as it might appear even if you do pay it back.
    – keshlam
    Jan 28, 2016 at 21:44

1 Answer 1


You should try to take out other loans sufficient to pay off your 401(k) loan if you can.

Maybe you can take out a home equity loan? You can also ask your bank about unsecured loans.

You should also check the rules for your new employer's 401(k), if you're rolling over your 401(k). There's a small possibility that you could take out another loan right now and apply it to the previous loan balance. Or if you need to wait, you could use it to help pay off any temporary loans that were needed to avoid the distribution penalty.

  • 2
    At worst, you could get a balance transfer credit card at 0% APR, pay the 3% xfer fee (630 if loan is 21k), and then pay the card off when you get the money after a month or two.
    – davmp
    Jan 28, 2016 at 21:43
  • A home equity loan might be too long of a wait. It will take at least a few weeks to close.
    – stannius
    Jan 29, 2016 at 0:30

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