Should you stop contributing while you repay a 401(k) loan?

Usually no. If cutting contributions means losing an employer match, the match you give up is often worth more than everything the loan costs you in growth.

Why people cut

A 401(k) loan payment comes out of take-home pay. On a $15,000 loan at 8% over five years, paid every two weeks, that’s about $140 a paycheck. For a lot of people the easiest place to find $140 is the contribution that also comes out of each check.

What that costs

Take someone paid every two weeks who contributes $150 a paycheck and gets a $75 match. Pausing both for the five years of the loan means $225 a paycheck doesn’t go in, 130 times.

At a 6% assumed return, that’s about $33,900 less in the account when the loan is paid off, before counting the loan’s own growth gap. The match alone is $9,750 of contributions you never get back, plus its growth.

You can check your own version in the true-cost calculator: open “Cutting contributions or leaving your job” and enter the amounts. The gap at 65 usually jumps.

Ways to keep the match

• Cut to the match, not to zero. If your plan matches the first few percent of pay, keep contributing at least that much. The rest is more flexible.
• Borrow less. A smaller loan has a smaller payment. The calculator shows the payment for any amount.
• Stretch the term. Up to five years for a general loan. A longer term lowers the payment but keeps the money out of the market longer.
• Compare a personal loan. If the 401(k) loan only works by pausing contributions, a personal loan with a similar payment keeps both your contributions and your invested balance intact. The comparison tool shows the trade.

The match rules are your plan’s. Your summary plan description says what’s matched and when it vests.