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Author: JMGee One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: 401K Rollover to IRA then Purchase Home Date: 11/3/1999 11:32 AM
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Ok, I need a tax expert here.

I have a colleague who wants to rollover a former employer's 401k money into a self-directed IRA. It is my understanding that the rules on IRA money recently changed to allow the use of IRA money to be withdrawn for the purchase of a taxpayer's first home.

If my friend rolls over his 401k money, then withdraws it to buy his home (say for a downpayment), will the 10% penalty for early withdrawal apply or not?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15070 of 76418
Subject: Re: 401K Rollover to IRA then Purchase Home Date: 11/3/1999 12:05 PM
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Greetings, JMGee, and welcome. You asked:

<<If my friend rolls over his 401k money, then withdraws it to buy his home (say for a downpayment), will the 10% penalty for early withdrawal apply or not?>>

When the money hits the IRA, it is subject to IRA rules. Therefore, up to the $10K lifetime limit may be withdrawn without penalty to pay the expenses of a first-time home purchase. Income taxes will be due on such a withdrawal, though.

Regards..Pixy

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