THESE DAYS, more than 85% of workers with 401(k)s can borrow from their plans. If you've been diligently socking away a portion of your salary over the past few years (and you've had a match to boot), chances are that puts a lot of cash at your fingertips. It certainly doesn't make sense to use this money for luxuries like a backyard swimming pool or a new car. But does it make sense to tap your 401(k) to pay off a loan? Typical plans allow you to borrow up to half your vested balance, but not more than $50,000. (Some plans might restrict borrowing for specific reasons like a home purchase, education or medical expenses.) You typically must pay the money back, with interest, over five years. But, because you're paying the interest to yourself, it isn't an additional cost. Just think of it as forced savings. If you don't repay the loan, you will owe income tax and a 10% early withdrawal penalty. Your browser is not Java-enabled. To view the worksheets and interactive graphs properly, you need to be using a Java-enabled browser (Netscape v. 3 or above, or Microsoft Internet Explorer v. 3 or above.), preferably on a Windows 95 machine. We are not currently supporting Java for Windows 3.1. If this configuration matches yours, check to make sure Java and Javascript are enabled in your browser options. Netscape 3.0: Select Options from your menu bar Select Network Preferences, then select LANGUAGES. "Enable Java" and "Enable Javascript" should both be checked. Click OK. Netscape 4.0: Select Edit from your menu bar Select Preferences, then select Advanced. "Enable Java" and "Enable Java script" should both be checked. Click OK. Internet Explorer 3.x: Select View from your menu bar Select Options, then select the Security tab. At the bottom of the page in the Active Content box, make sure all boxes are checked. (Note: You might also want to click the Safety Level button here and select Medium to prevent warning message interruptions.) Internet Explorer 4.0: Select View from your menu bar Select Internet Options, then the Security tab. For the Internet Zone, select Custom and click on Settings. Scroll down to the Java area of the list. Make sure that, under Java permissions, that 'Disable Java' is NOT active. Set this to low, medium, or high security instead. Scroll down to the Scripting area of the list. Under Scripting, set Active scripting to Enable, and set Scripting of Java applets to Enable. Click OK to return the Security Settings, then click Apply, and then OK. It's also possible that you are accessing the Internet from behind a corporate firewall that filters out Java. Your Systems Administrator may be able to allow Java coming from our IP address. If you are using the AOL browser, you must be using 32-bit version of the AOL 4.0 browser for Win 95, which comes bundled with Internet Explorer. If you are not using the latest release of the AOL software, contact AOL for a free upgrade. Sounds like a pretty good deal, right? Well, there are a couple of big drawbacks. First, you're giving up the tax-free compounding of the money you withdraw. That could have a big effect on the size of your nest egg come retirement. Also if you leave your current employer for any reason — whether you quit, are laid off or fired — you'll probably have to pay the loan back immediately. What if you don't have the money on hand to repay the loan? It will be treated as an early withdrawal, which means you'll owe taxes plus a penalty. Bottom line? Before you even consider tapping your 401(k), make sure you have no other nonretirement sources available to repay the loan.