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Unread 11-30-2010, 06:49 AM
 
995 posts, read 1,653,925 times
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Default considering cashing 401k out to purchase home..Won't have to pay the 10% penalty..but will have to pay some penalty?..

Considering cashing out 401k to purchase home.......Will not have to pay a 10% charge but was informed will have to pay a percentage on money because it will be considered income........Can anyone clarify this for me.......We are contacting our accountant but was wondering if anyone out there had any advice......
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Unread 11-30-2010, 06:56 AM
 
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You can use $10,000 without penalty but you will have to pay TAX on all of what you use. I know this is an available option but it probably isn't the BEST option to buy a home.
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Unread 11-30-2010, 07:39 AM
 
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Quote:
Originally Posted by deeds View Post
Considering cashing out 401k to purchase home.......Will not have to pay a 10% charge but was informed will have to pay a percentage on money because it will be considered income........Can anyone clarify this for me.......We are contacting our accountant but was wondering if anyone out there had any advice......
Anything that comes out of a pre-tax retirement account will add to your income, so that you will be taxed at whatever rate of income tax you have that year.

So if you were to make $ 65,000 BEFORE taking out the money for the home, you would add whatever is taken out to the $ 65,000 to calculate your income.

No 10% penalty though.
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Unread 11-30-2010, 09:21 AM
 
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Unless homes are appreciating in your area at a rate higher than the market rate your 401k would earn, and unless you are considering selling your home in the future and banking all profit (rather than using the excess funds to trade up), I can't see how this is a good decision.
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Unread 11-30-2010, 10:52 AM
 
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If it's through your job it won't happen. And cashing out your 401k is pretty stupid.
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Unread 11-30-2010, 11:10 AM
 
Location: West Orange, NJ
10,428 posts, read 6,736,859 times
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401k loan should be used as a last result. Is that what you're considering? I'm pretty certain you cannot take money from a 401k early without paying the tax and the 10% penalty.

i'd explore every other option possible first.

also consider, you're pulling money out of your 401k when it's low (selling low), before it has fully recovered from the past 3 years of volotility.
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Unread 11-30-2010, 02:42 PM
 
Location: Houston, TX
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401k is for RETIREMENT. Dont cash it in.
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Unread 12-01-2010, 07:03 AM
 
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Default In a financial bind......Parent took a reverse mtge on home we lived in together my parent passed......

We have enough money in our 401k to pay off house.......This is what we would use the money for.....
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Unread 12-01-2010, 07:49 AM
 
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Don't do it. Save the money and don't touch your 401K. A house is not an investment and most people then put off paying themselves first so you be behind on your 401K.

Have the money for a downpayment and also emergency funds before buying a home.
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Unread 12-01-2010, 08:29 PM
 
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Parent took a reverse mtge on home we lived in together my parent passed
Sell home and rent. Problem solved.
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