401(k) loans are actually a distribution of your own money that must be paid back with interest. The amount taken is no longer invested and will not rise or fall with the rest of your portfolio. Failure to repay the loan will be considered a premature distribution subject to income tax and a 10% penalty on the amount taken. Repayment terms are generally nonnegotiable.
72t *IRS Rev. Rul. 2002-62 allows for penalty-free withdrawals from an IRA prior to age 59 ½ when there is otherwise a 10% penalty on early withdrawal. Withdrawals are taxed at your income rate. Payments must continue for the longer of five years or the attainment of 59 ½. Therefore, once started, these become required mandatory distributions subject to the early withdrawal penalty if ceased. Investors should take into consideration the possibility of depleting their retirement account well before the end of their life expectancy.
To qualify for the tax free penalty free withdrawal of earnings, a Roth 401(k) must be in place for at least five tax years, and the distribution must take place after age 591/2 or due to death or disability. Before taking any specific action, be sure to consult with your tax professional.