I currently have funds in a 401a.  I am younger than 59.5, and I would like to rollover 10k into a traditional IRA to use towards a first time home purchase avoiding the 10% penalty for early withdrawal of funds.  My question is, can I simply rollover exactly 10k into the IRA, and immediately withdraw those funds to purchase a home, and close out the IRA?  any issues with this?  any institutions you'd recommend that could accomodate this in a short period of time, say less than 2 weeks?

My other concern - If I roll over that money, will I owe income tax on both the rollover transaction, and then again on the withdrawal?

Thanks for the help.

Also, just to save you the time of telling me it's a bad decision to withdraw, I will be withdrawing regardless, and do have 5 retirement accounts between my wife and I already, so we are generally not dumb with money.

I know this is slightly off-topic from your request, but have you first checked to see about a 401k loan? Some 401k plans will allow you to borrow against them for certain things. IE, I can borrow up to $5k for anything I want, and $50k for a home purchase. The benefit is that I pay myself the interest, don't have to worry about paying taxes on it etc. Furthermore, over the past several years, if I had too much income and needed to reduce my MAGI I contributed more to my 401k to not only reduce my MAGI, but put away a vast amount of pre-tax dollars that could be utilized for a home purchase. The ability for me to use pre-tax dollars to offset the interest I would otherwise be losing out-of-pocket to a mortgage company outweighs the potential losses I may experience from market losses etc.

I don't know that I'm well-versed enough in the intricacies of roll-overs to answer your question specifically.

If your rolling over money from a 401a directly to a IRA there is no penalty or taxes liable for it, since its considered a transfer from a similar retirement product to another retirement product.

As to if you can roll over exactly 10K you can but if its in money market fund because it does not change value.
If its in stock funds the value of the shares change, they would have to sell a little more then the 10K to make sure you had 10K after everything is said and done.

But just a disclaimer

Not a Retirement specialist or slept in a Holiday Inn but check with your plan administrators of your 401a

My former plan had a provision to take a loan but it could only be used for certain things and IIRC one was a home purchase.

It did not show as a early with draw but if you were to leave the company the outstanding balance became due.  If you were unable to pay it the remaining  balance would show as disbursement.

YMMV

It's my understanding that you can roll it into an IRA but the amount would be taxed as income.  You would avoid the 10% early withdrawal penalty as long as you didn't touch this money for 5 years.

That would be if you rolled it into a Roth account.

OP, we did exactly what you are proposing about three years ago.  Rolled my Wife's 401(k) into a Traditional IRA, then withdrew the funds for our home purchase.  The rollover is reportable but tax-free, the withdrawal is subject to income tax but not the early withdrawal penalty.

This is smart depending both on the plane rules regarding paying the loan back due to separation of service and if you are going to stay at that company for a long time or if you may get laid off.

You need to keep in mind that you will have to pay the loan off while employed.