Boeing VIP Loan Guide
Did you know that you can take loans from your Boeing VIP account? It’s true!
If you’re wondering how the loan process works, you’re in the right place. This guide will provide an in-depth look at the loan options available, as well as:
How to apply for a loan
When you’ll have to repay your loan
How it may affect your taxes
In short, we’re here to give you all the information you need to make an informed decision. Let’s get started!
Key Takeaways
You can borrow funds from your Boeing VIP 401(k) account.
A general purpose loan can be withdrawn for any reason, while a residential loan must be used for buying, building, or renovating a primary home.
Loan repayment periods vary from three months to 20 years, depending on the loan type.
Loans are non-taxable if repaid on time, but defaults are treated as distributions and may incur taxes and penalties.
The maximum loan amount is whichever is less: $50,000 or 50% of your vested account balance.
Overview of the Boeing VIP
Before we get started on loans, here’s a quick refresher on how the Boeing VIP works.
The Boeing Voluntary Investment Plan (VIP), also known as the Boeing Company 401(k) Retirement Plan, is Boeing’s 401(k) program. This program lets employees invest a portion of their salary in various funds. These investments will then grow over time, helping you build more wealth for retirement.
But what if you need to make a withdrawal before retiring?
One option for this is to take a loan from your VIP account. This essentially means borrowing against your own retirement savings. As with any loan, there are rules for how much you can borrow and when you’ll have to pay it back.
Boeing VIP Loan Rules
Boeing VIP offers two main types of loans: general purpose loans and residential loans.
1. General Purpose Loan
Purpose: General purpose loans can be used for any personal expenses. This may include home improvements, medical bills, or debt consolidation — but ultimately, it’s up to you! There are no restrictions on how the borrowed funds can be used.
Repayment period: The repayment period for general purpose loans ranges from a minimum of three months to a maximum of 5 years (60 months).
Interest rate: The interest rate on VIP loans is typically fixed for the life of the loan. It is based on the prime rate as quoted in The Wall Street Journal on the last business day of the previous month. (This rate can be favorable when compared to other types of personal loans!)
2. Residential Loan
Purpose: Residential Loans are intended for purchasing or renovating a primary residence. This can include buying an existing home, building a new home, or undertaking significant renovations on your current primary residence.
Repayment period: The repayment period for residential loans ranges from five years and one month (61 months) up to 20 years (240 months). This provides a longer time frame to manage larger expenses associated with buying or renovating a home.
Interest rate: Just like with general purpose loans, the interest rate for residential loans is fixed for the life of the loan and based on the prime rate as quoted in The Wall Street Journal.
Boeing VIP Loan Limits
For both general purpose loans and residential loans, the maximum amount you can borrow from your Boeing VIP account is generally the lesser of these:
50% of your vested account balance
$50,000 (reduced by any outstanding loan balance you have had in the past 12 months)
This means that ultimately, the most you would be able to borrow from your Boeing VIP is $50,000.
PRO TIP: VIP loans do not require a credit check. Your credit history will not impact the amount you can borrow or limit your ability to take a loan. And since VIP loans do not appear on your credit report, taking a loan will not affect your credit score.
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Boeing VIP Loan Repayment Periods
As mentioned above, general purpose loans and residential loans have different repayment periods.
General purpose loan:
Minimum repayment period: 3 months
Maximum repayment period: 5 years (60 months)
Residential loan:
Minimum repayment period: 5 years and 1 month (61 months)
Maximum repayment period: 20 years (240 months)
You can choose a repayment period within these ranges based on your financial situation and repayment capacity. If you are able to repay your loan in full before the end of your repayment period, you can do so without owing any additional penalties.
Boeing VIP Loan Repayment Methods
In most cases, Boeing VIP loan repayments are made through payroll deductions. Whenever you receive your paycheck, a certain amount is automatically dedicated to go toward repaying your debt. This simplifies the process and reduces the risk of missed payments.
If this option doesn’t work — for example, if your paycheck does not cover your payment amount or you are no longer employed at Boeing — you can use an alternate payment method. This will likely mean sending your payment via direct debit or mail. Acceptable forms of mail-in payment include:
Money orders
Certified checks
Cashier’s checks
If you are on military leave, your loan repayments can be suspended for the duration of your leave, and the loan maturity date will be extended by the length of your military leave — up to five years. (Your loan will continue to accrue interest during this period.)
Applying for a Boeing VIP Loan: Step-by-Step Guide
Log in to your account through the NetBenefits website managed by Fidelity. This site serves as the primary portal for managing your retirement plan, including loan applications.
Once logged in, navigate to the "I want to…" section, which directs you to various account management options, including loan requests.
Select the option to request a loan.
Select the type of loan you want. This can be either a general purpose loan or a residential loan.
Enter the desired loan amount and select the repayment period.
Review the interest rate, which is based on the prime rate as quoted in The Wall Street Journal on the last business day of the last month.
If necessary, provide documentation.
If you are applying for a residential loan, you will now be prompted to submit documents to justify the loan. This may mean a purchase agreement, financing agreement, or building permit. (These documents must be submitted within 45 days of your loan request. The application remains pending until all required documents are received and reviewed.)
If you are applying for a general purpose loan, no further documentation is required. In most cases, your request will be automatically approved once you complete your application.
Submit your application and e-sign a promissory note.
And that’s it! Your application for a Boeing VIP loan is complete. Allow up to three business days for the loan to be processed. An additional three business days are typically required for the loan check to be available for distribution.
PRO TIP: Before applying for a VIP loan, consult with a financial advisor to make sure that the loan aligns with your financial goals. Borrowing against your 401(k) account without careful planning could hurt your retirement strategy in the long run!
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Financial Considerations When Borrowing from Your Boeing VIP
Understanding the full implications of borrowing from your Boeing VIP is crucial for managing your finances. Let’s go over some points worth knowing.
Non-Taxable Loans
When you take a loan from your VIP account, it is not considered a taxable distribution as long as you adhere to the loan terms and repayment schedule. The borrowed amount is treated as a loan rather than a withdrawal, meaning you do not owe income tax on the loan proceeds at the time you receive them.
…Unless You Default
If you don’t repay your loan within the agreed-upon timeline, you will default on the loan. It will then be considered a distribution. This means the amount is subject to ordinary income tax, and if you are under the age of 59½, it may also be subject to a 10% early withdrawal penalty.
Leaving Boeing
If you leave Boeing, either voluntarily or involuntarily, the outstanding loan balance may become due immediately. If you cannot repay the loan in full, it will be considered a default and taxed accordingly.
Repaying (Yourself) with Interest
While your loan will accrue interest, this interest goes back into your VIP account when paid. Because you are borrowing from your own 401(k) account, you are repaying that account as the lender. This means you are effectively paying yourself back.
Impact on Retirement Savings
Borrowing from your VIP account reduces the funds available for investment, potentially affecting the long-term growth of your retirement savings. It is important to consider the immediate financial need against the potential impact on your future finances.
Pros and Cons of Taking a VIP Loan
Taking a loan from your Boeing VIP can have advantages and disadvantages. Understanding the pros and cons can help you make an informed decision.
Pros of Taking a VIP Loan
Low interest rates: Boeing VIP loans typically have lower interest rates than other personal loans or credit cards.
Reinvesting in retirement: The interest you pay goes back into your retirement account, effectively "paying yourself" rather than a bank or credit card company.
Fast processing: General purpose loans are typically approved automatically upon submission of the application, providing quick access to funds when needed. Residential loans are also reviewed and approved quickly.
No credit check: VIP loans do not require a credit check, making them accessible to employees regardless of their credit history. This can be particularly beneficial if you need funds quickly and have a lower credit score.
Payroll deductions: Loan repayments are automatically deducted from your paycheck, simplifying the repayment process and ensuring timely payments.
Early repayment: VIP loans can be repaid early without penalties, allowing you to save on interest costs if your financial situation improves.
No impact on credit score: Since VIP loans do not involve credit checks or appear on your credit report, taking a loan will not affect your credit score.
Cons of Taking a VIP Loan
Reduced investment growth: Borrowing from your VIP account reduces the amount of funds invested in your retirement plan. This can affect the long-term growth of your retirement savings, especially if you borrow a large amount.
Risk of default: If you default on the loan, the outstanding balance is treated as a taxable distribution, subject to income tax and early withdrawal penalties if you are under 59½. This can create a substantial tax burden.
Employment termination: If you leave Boeing, either voluntarily or involuntarily, the outstanding loan balance may become due immediately. If you cannot repay the loan in full, it will be considered a default and subject to the tax consequences mentioned above.
Potential for lower contributions: Making loan repayments could reduce your disposable income, potentially leading to lower contributions to your VIP account. This reduction can also affect employer matching contributions, further impacting your retirement savings.
Administrative fees: Taking a loan from your VIP account involves certain administrative fees, such as a non-refundable loan application fee and possible fees for expedited check delivery or rejected payments. These additional costs can add up and should be considered when evaluating the overall cost of the loan.
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Boeing VIP Loan FAQs
Can I take out multiple loans from my VIP account at the same time?
Yes, you can have up to two outstanding loans at any time, regardless of whether they are both general, both residential, or one of each. If you wish to pay off a loan early to request another, you must wait until the payoff is processed before requesting a new loan. Additionally, there is a seven-day waiting period for requesting a new loan if your payoff was made by direct debit, money order, cashier's check, or certified check.
What happens to my VIP loan if I go on an extended leave of absence?
If you go on an approved leave of absence, loan repayments will continue to be taken from any paycheck you receive. If you are not receiving pay or your pay is insufficient, you should continue to make scheduled loan repayments directly by mail. (If you are on military leave, your payments will be deferred.)
Can I change the repayment schedule of my VIP loan?
The repayment schedule is generally fixed once the loan is taken out. However, if you transfer payroll locations or are rehired at a different location with a different pay frequency, your loan will be automatically adjusted to match the new pay frequency. For instance, if your previous location was paid bi-weekly and your new location pays weekly, your loan repayments will be adjusted from bi-weekly to weekly.
Are there any fees associated with taking out a VIP loan?
Yes, there are several fees associated with taking out a VIP loan:
A $50 non-refundable loan application fee is charged for each loan application processed.
If you request expedited delivery of your loan check, your account will be charged a $15 fee.
If your loan repayment or payoff is rejected (e.g., due to insufficient funds or incorrect banking information), a $15 fee will be charged to your account.
What happens if my loan request is denied?
In most cases, general purpose loans are approved automatically. If your residential loan request is denied, Boeing will contact you with their reason for denial. They may request additional documentation to justify your request.
Can I default on my VIP loan?
A loan will default if it is not repaid in full within 30 days after the loan is due or if no payments are made for 90 days. (Different rules may apply during a leave of absence.)
If a loan defaults, the outstanding amount will be offset against the participant's VIP account balance when they become eligible for a full distribution.
Can I repay my VIP loan early?
Yes, you can repay your VIP loan early without penalties. However, partial payoffs are not permitted, meaning the loan must be repaid in full.
Early repayment can help save on interest costs. This is a great idea if you can afford it!
What other options do I have for early withdrawal from my Boeing VIP?
In addition to loans, Boeing VIP participants may have other options for early withdrawal, including:
Hardship withdrawals: These are available for immediate and heavy financial needs such as medical expenses, purchase of a primary residence, tuition fees, or preventing eviction or foreclosure.
In-service withdrawals: Some plans allow for in-service withdrawals after a certain age, typically 59½, without penalties.
Disability withdrawals: If you become disabled, you may be eligible for penalty-free withdrawals from your VIP account.
Qualified domestic relations order (QDRO): If a court issues a QDRO as part of a divorce or legal separation, funds can be withdrawn or transferred to an ex-spouse without penalty.
Get Help from TrueWealth!
If you're considering a loan from your Boeing VIP account or need personalized financial advice, we're here to help.
At TrueWealth Financial Partners, we specialize in helping employees optimize their finances and prepare for retirement. Just reach out, and we’ll be happy to assist you in any way we can.
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