Message Font: Serif | Sans-Serif
UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev | Next
Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25707  
Subject: Re: 401k withdrawal question Date: 12/4/2012 2:42 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
In order to pay off her $6000 loan, she'll have to take out from the 401k not only the $6000, but also enough to cover the income tax on the total amount of the distribution.

Sorry, this is not correct.

The money for the loan was already taken out of her account, so the only way that she can 'withdraw' the loan balance is to default on the payments. The question is - assuming she's still employed, will her employer allow her to stop taking those payments out of her paycheck so that she will default?

Also, if she were to withdraw the $13k and use some of the $13k to pay back the loan, she would now have a $6k balance in her account, and would not owe taxes or penalties on the $6k - just on the $13k. She would have to initiate another withdrawal to withdraw the $6k if she wanted that money out of the plan. Since plans often have pretty stringent rules about withdrawals, she may have to wait 6 months - 1 year (or more) in order to initiate that 2nd withdrawal.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev | Next


Foolanthropy 2015!
Fistula Foundation: A World of Good!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Saul's Investing Discussions

Gilead Sciences CC Thoughts
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.