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tpod,

back in late december i withdrew some after-tax money from my 401k. i am using this money to buy a home, and i am also a first time home buyer. do i have to pay the 10% penalty on this money?

If what you took as a withdrawal represented some or all of your after-tax contributions to the 401(k) account, then no, you do not owe income taxes or any penalty on those funds -- it's your money, to do with as you choose.

Of course, what you gave up was the ability to accumulate the earnings on those after-tax contributions in a tax-deferred manner. You presumably considered this, and decided that withdrawing these funds was the best way to purchase a home. You could possibly have borrowed some or all of those funds from the 401(k), and paid them back via payroll deductions. But you didn't ask for any retroactive advice, and I'm not saying I think you necessarily made a mistake -- I just hope you keep yourself informed of the flexibility available to you with the 401(k) account.

Phooley
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