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Personal Finances / Buying or Selling a Home


Subject:  Re: Downpayment Sources Date:  5/11/2013  10:40 AM
Author:  JAFO31 Number:  125253 of 128973


{{{"That's if you jump through all the hoops, and don't leave your job before you've put it all back."}}}

<<<Are you certain of the truth of that statement? I am not. And it certainly was not true when I took a 401-k loan for home purchase.>>>

"This discussion got me curious enough to do some digging in the Code. Of course, there's nothing in section 401 where you'd think it would be. My second thought was section 72, where they hide just about everything regarding retirement plans. Bingo!

My curiosity extends only so far, and there's so much crammed into that section, that I didn't dig any further. I did notice that there seem to have been significant changes in 1982, there's a $50,000 limit (or lower), and primary residence loans must be paid back in a "reasonable" time (as opposed to other loans, which must be paid back in 5 years).

I too have something rattling around in my mind about accelerated payback if you leave employment, but I can't cite a reference. No matter. The most important thing to remember about anything regarding 401(k)'s is that there's not a lot in the law, and much is left up to the plan to decide. When you're contemplating doing anything regarding your 401(k) make sure you understand exactly how your plan deals with all situations you might encounter."

Phil, my recollection is that companies got tired of dealing with actualy payments from people who left employment (no paycheck withholding if no longer employed) and lobbied to either (1) have the law changed to allow the 401-k plan documents to provide for loan acceleration if the borrower was no longer employed; thus no dealing with payment checks, but IIRC correctly, this was a change to the "reasonable" time requirement ( a chnage in the terms of loan) or (2) that ongoing monthly payments had to be by payroll withholding.

What I do know is that I had my one and only 401-k loan outstanding for several years after departing that employer.

Regards, JAFO
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