2007-01-31 13:40:10 · 5 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
You may be able to borrow against it but only if you're still employed with the company. Not sure why the guy said that you get taxed on it twice...the only thing you'd get taxed on twice is the interest payments and you should be thankful that those payments are going into your account instead of someone elses. The principal is tax neutral!!! If you got taxed on the loan THEN he would be right..but you aren't. Plus, the interest rate you get charged can be no less then what a local bank would charge you...in many cases the rate is prime + 2% which right now is 10.25%. That's a decent return in a mediocre market.
As for penalty...pretty much you can fix on a 10% penalty if you're under age 55. There are some exclusions but not many. And, your 401k may not even allow such type of withdrawals. You should check about your options.
Bottom line is that not touching it is best option, borrowing is next, and withdrawal is by far the worst.
2007-02-01 08:02:58 · answer #1 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
You would only withdraw from a 401k if you are about to go bankrupt or about to lose a house. I doubt I would do it even then myself. You can only withdraw from it if you no longer work there, and can only borrow against it if you still work there. The problem with borrowing against it is that you must pay interest on the loan, and you will be paying off the loan with money you get after taxes. In other words, you will be paying taxes twice to pay off a tax deferred loan. Plus, if you leave that job the entire loan becomes due in 30 days. If you don't pay it back in thirty days penalties and taxes come into play. Doesn't sound like a good idea eh?? If you want to withdraw from a 401k you will get hit with a 10% penalty AND taxes become due. After all that you will actually receive about 60-70% of what you put in. Again, not a good idea eh???
2007-01-31 15:55:13 · answer #2 · answered by ontopofoldsmokie 6 · 0⤊ 0⤋
I am not sure what the penalty is for early withdrawal but what we did was roll the money from 401k into IRA account then took out what we could and then all we had to pay was taxes on the money. We have also borrowed against our 401k. The payments for us was held out every pay day plus you pay yourself back interest. If I am not mistaken you can also take money out due to hardship. Not sure if there is a penalty or not, but more than likely you will be taxed. You must always pay taxes on 401k money if taken out (except for loan) because money has not been taxed. No taxes however if it is a loan. Hope I have helped.
2007-01-31 16:22:53 · answer #3 · answered by Debbie H 3 · 0⤊ 0⤋
Some businesses do let you take a loan against your 401k, letting you pay it back at a usually lower interest rate than your local bank. but borrowing against it is usually a bad idea to begin with.
As far a withdrawing from your 401k account, you will get penalized I think 10% plus what ever your income tax bracket is on top of it. Once again a very foolish idea.
2007-01-31 15:02:03 · answer #4 · answered by tastoller 2 · 0⤊ 0⤋
my husband lost his job, he moved his 401 k into an IRA but took 20 thousand out topay off the house, can that help with the 10 percent taxes
2015-02-15 01:49:12 · answer #5 · answered by Robin 1 · 0⤊ 0⤋