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If you take a early withdraw you will be charged a ten percent penalty if your are under the age of 59-1/2 or younger.

The state may add additional penalties. My state it is 2.5%.

Also when you pay back your 401K plus any interest you will be paying yourself back from the gross portion [already taxed]of your paycheck, meaning that you are paying double tax on 401K due to the fact that they will tax you when you someday take a withdraw after retirement.

401K loans have issues but double taxation is a red herring. The loan was made pre-tax and spent as after tax. Paying back the principal completes the cycle by making after-tax funds pre-tax. There is no double taxation on the loan principal. If you fail to pay back the 401K load, the tax issue is corrected by making the distribution taxable income.

Interest will be double taxed BUT interest on a personal loan is not deductible. It is paid with after tax funds. Returns earned within the 401K are taxable. Again compared to a personal loan the income taxes are the same. Earning within the 401K would have been taxed. It is just that you are paying the funds to yourself.
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leverage penalty free early ira/401K withdrawal so weighing pros and cons

Penalty free but not tax free. It is getting late in the year so look at your marginal tax rate and any other impacts the withdrawal might have.
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Thanks reallyalldone, yes, aware of that should have mentioned. thanks for feedback
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If the choice is a 401K withdrawal, waiting until you need it maybe a better choice for taxes. We are near the end of the year. Distributions now would be taxed higher than during a year where your income would be lower.

If allowed, another thought would be to a partial conversion to a ROTH 401K. The result of an early withdrawal would be that the increase would be taxable. If the job loss doesn't happen then it can remain in a 401K ROTH.
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Thsnks for ideas.. ive got a 401k, ira and roth as options but not much available in roth contributions to take, its mostly earnings and im only 47..
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leverage penalty free early ira/401K withdrawal

It's only penalty free if you've already been impacted by COVID-19. That means if your potential job loss is due to COVID-19, you could take the money out of the IRA or 401(k), but only AFTER you actually lose your job, not before. If your potential job loss is not due to COVID-19, and you haven't otherwise been impacted by COVID-19, withdrawals aren't penalty-free.

I would generally thing refi would be better option as I know I will get lower rate and cash back BUT my loan amount goes up and more risk if fail to miss some payments.

If you have a higher rate than you can get now, I would suggest refinancing now without taking cash out. It will lower your payment by both giving you a lower rate and by extending the term of the loan. Having a lower payment after you've lost your job will lessen the amount of cash you need to come up with each month. Also, note that cash out refis generally come with higher rates than refis without cash out.

With your currently higher payment, your loan is already at risk if you miss payments, and you have a higher risk of missing those payments because of the higher payment.

That said, what I would recommend is to:
1) Put together a game plan of what spending you will cut if you lose your job
2) Implement at least part of that game plan now, while you still have a job but are concerned you may lose it

That should generate some extra cash that you can put away to help cover you if you do lose your job.

AJ
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AJ, really appreciate you taken time spell out those options. I appreciate it.
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I would not take a withdraw from your 401K because it is designed to put money or savings into your 401k account from the net or untaxed portion of your paycheck. If you take a early withdraw you will be charged a ten percent penalty if your are under the age of 59-1/2 or younger. Also when you pay back your 401K plus any interest you will be paying yourself back from the gross portion [already taxed]of your paycheck, meaning that you are paying double tax on 401K due to the fact that they will tax you when you someday take a withdraw after retirement. If you have another option I would take it. I hope this helped. Good luck.
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I would not take a withdraw from your 401K because it is designed to put money or savings into your 401k account from the net or untaxed portion of your paycheck. If you take a early withdraw you will be charged a ten percent penalty if your are under the age of 59-1/2 or younger. Also when you pay back your 401K plus any interest you will be paying yourself back from the gross portion [already taxed]of your paycheck, meaning that you are paying double tax on 401K due to the fact that they will tax you when you someday take a withdraw after retirement. If you have another option I would take it. I hope this helped. Good luck.
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Welcome to TMF. I would strongly suggest that when you post, unless you actually do put in your own line breaks, that you NOT check the "Table Data (fixed-width font, enter your own line breaks)" box when posting.

If you take a early withdraw you will be charged a ten percent penalty if your are under the age of 59-1/2 or younger.

Unless you meet an exception, which, in 2020, includes being impacted by COVID-19.

Also when you pay back your 401K plus any interest you will be paying yourself back from the gross portion [already taxed]of your paycheck, meaning that you are paying double tax on 401K due to the fact that they will tax you when you someday take a withdraw after retirement.

Sorry, this is a red herring. First of all, the OP didn't talk about taking out a loan from their 401(k), which is the way that you would generally 'pay it back from your paycheck'. But even if they had been talking about taking a loan, there is no double taxation of income. We are taxed on income. When you take out a 401(k) loan, it doesn't change your income, so you don't pay any additional income tax. While you are paying back the 401(k) loan, you still have the same income, so there isn't any additional income tax. When you withdraw from your 401(k), you are taxed on the withdrawal amount as income. You aren't taxed any additional amount because some of the money was once taken out as a loan and was then repaid. So, where is the double taxation? You pay the same amount of income taxes throughout your lifetime whether or not you take out a 401(k) loan.

In fact, some people say that by taking out a 401(k) loan, you are actually lessening the value that the account will grow to by the time you retire, because the return on the 401(k) loan is less than you can get in stocks.* If that's the case, you actually lower your lifetime tax bill a bit, because a lower account balance will result in lower RMDs, which will result in lower taxes. So, if that's correct, over your lifetime, by taking out a 401(k) loan, you will actually pay less in income taxes.

AJ
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If you take a early withdraw you will be charged a ten percent penalty if your are under the age of 59-1/2 or younger.

The state may add additional penalties. My state it is 2.5%.

Also when you pay back your 401K plus any interest you will be paying yourself back from the gross portion [already taxed]of your paycheck, meaning that you are paying double tax on 401K due to the fact that they will tax you when you someday take a withdraw after retirement.

401K loans have issues but double taxation is a red herring. The loan was made pre-tax and spent as after tax. Paying back the principal completes the cycle by making after-tax funds pre-tax. There is no double taxation on the loan principal. If you fail to pay back the 401K load, the tax issue is corrected by making the distribution taxable income.

Interest will be double taxed BUT interest on a personal loan is not deductible. It is paid with after tax funds. Returns earned within the 401K are taxable. Again compared to a personal loan the income taxes are the same. Earning within the 401K would have been taxed. It is just that you are paying the funds to yourself.
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