Can You Borrow Money From Retirement in North Carolina?

Borrowing money from your retirement can be risky and reduces the money you will have in the future.

As a North Carolina resident, there are no provisions in the legislature regarding the use of retirement funds as personal loans. The type of retirement account you have determines whether you have access to it for loan proceeds. Types of retirement accounts vary between public and private sector employees. Obtaining a loan from your retirement account comes with restrictions that you must follow in order to not face default.


Private Sector Employees

As an employee of a private company, you likely have a 401k or 403b. These plans allow for loans, although the availability of this option is up to your employer. The Employee Benefit Research Institute found that 21 percent of 401k plan holders had outstanding loans against them in 2009.


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Public Sector Employees

Most public sector employees in North Carolina receive their retirement benefits from the state retirement system. This system's retirement plan is a 401a Defined Benefit Plan and does not allow for borrowing money from its retirement accounts.


Alternatives for Public Sector Employees

As a public employee, you have access to the North Carolina Deferred Compensation and 401k Plans. If you opted in for one of these plans, you can borrow money from it. You must pay a $60 fee to access the loan.



You can borrow up to $50,000 or 50 percent of your account balance, whichever is less. Although the money you borrow generates interest for you, it can take away money that would be earning higher returns in the market. There are no restrictions on how you can use the money and no credit check is involved. You must repay the loan in five years or in some cases upon employment termination. You may repay money borrowed for purchasing a primary home beyond five years. Default on the loan converts it to an early distribution, making it subject to income tax and a 10 percent early withdrawal penalty if you are younger than 59 and a half years old.