I am planning on using my 401k with my current employer for part of my reserves requirement. I understand that if the only way I can withdraw funds is if I leave my job, I can’t use these funds, however my employer allows 401k loans as well as hardship withdrawals (e.g. to avoid foreclosure on a primary home). The hardship withdrawal may only be taken if all other options are exhausted, so in the case of a hardship I would have to take out a 401k loan first, then do the hardship withdrawal. Loans are capped at 50 percent of the vested balance, and hardship withdrawals are 100% of my contributions only, not employer contributions.
My question is what amount would count as reserves from this account. As a hypothetical, let’s say my vested balance is $ 20k, but my own contributions are only $ 5k. I am thinking in the event of a hardship I could take out a $ 10k 401k loan, then withdraw my $ 5k in contributions, for a total of $ 15k. The remaining $ 5k of the balance is not accessible and therefore can’t be used towards reserves. I assume the lender would only allow 60% of the $ 15k to be used as reserves (if that is their percentage). Or would they allow the full amount of the $ 10k loan since there is no penalty/taxes on that, plus 60% of the $ 5k hardship withdrawal?