No. of Recommendations: 0

{{{"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
Print the post  


Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
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.