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Posted: 3/15/2011 5:26:09 AM EST
42yrs old, recently divorced, and starting over. I have enough cash to pay off my debt, so I would effectively be debt and cash free. Not wanting to do the whole buy, sell, move, build equity thing again. I am wondering if a 401K withdrawel for a significant down payment would be wise at this time. That way I could buy right into the type of home I really want, while the market is down and rates are favorable.
Link Posted: 3/15/2011 7:25:54 AM EST
You wouldn't be the first to do it, and certianly not the last in this economy. Just keep in mind that a premature distribution (anytime you take money out of a qualified plan under the age of 59 1/2) is a taxable event. So just keep enough set aside to cover your taxable consequence . At least thats my $.02.

Good luck! Hope you get the house you want!
Link Posted: 3/15/2011 7:29:17 AM EST
Originally Posted By DaddGoneMadd:
42yrs old, recently divorced, and starting over. I have enough cash to pay off my debt, so I would effectively be debt and cash free. Not wanting to do the whole buy, sell, move, build equity thing again. I am wondering if a 401K withdrawel for a significant down payment would be wise at this time. That way I could buy right into the type of home I really want, while the market is down and rates are favorable.


You should be able to borrow (not withdraw) up to $50K from your 401K for a house. Check with you administrator. Usually there is a small administrative fee and you will pay the money back to yourself with about a 8% interest rate. But the interest goes to *you*, so it's a pretty good deal.

Link Posted: 3/15/2011 8:15:48 AM EST

Originally Posted By Andr0id:
Originally Posted By DaddGoneMadd:
42yrs old, recently divorced, and starting over. I have enough cash to pay off my debt, so I would effectively be debt and cash free. Not wanting to do the whole buy, sell, move, build equity thing again. I am wondering if a 401K withdrawel for a significant down payment would be wise at this time. That way I could buy right into the type of home I really want, while the market is down and rates are favorable.


You should be able to borrow (not withdraw) up to $50K from your 401K for a house. Check with you administrator. Usually there is a small administrative fee and you will pay the money back to yourself with about a 8% interest rate. But the interest goes to *you*, so it's a pretty good deal.


It can be a good option, but the downside is that if you lose your job, you have to pay it back all at once. It can become a real pita.
Link Posted: 3/15/2011 9:29:30 AM EST
[Last Edit: 3/15/2011 9:30:19 AM EST by Andr0id]
Originally Posted By BillofRights:

Originally Posted By Andr0id:
Originally Posted By DaddGoneMadd:
42yrs old, recently divorced, and starting over. I have enough cash to pay off my debt, so I would effectively be debt and cash free. Not wanting to do the whole buy, sell, move, build equity thing again. I am wondering if a 401K withdrawel for a significant down payment would be wise at this time. That way I could buy right into the type of home I really want, while the market is down and rates are favorable.


You should be able to borrow (not withdraw) up to $50K from your 401K for a house. Check with you administrator. Usually there is a small administrative fee and you will pay the money back to yourself with about a 8% interest rate. But the interest goes to *you*, so it's a pretty good deal.


It can be a good option, but the downside is that if you lose your job, you have to pay it back all at once. It can become a real pita.


Yes, but but I think the worst that can happen if you can't pay it back is that it will be converted to a withdrawal with the 10% penalty which is what he was thinking of doing anyway.

But you could end up owing IRS money when it's inconvenient. (Not that it's ever convenient giving money to the IRS...)

It's best to have other investments that could be liquidated in an emergency.

Link Posted: 3/15/2011 11:37:24 AM EST
I was under the impression that a withdrawel for a primary home was not subject to the 10% penalty, only subject to taxes.
Link Posted: 3/15/2011 5:42:20 PM EST
Originally Posted By DaddGoneMadd:
I was under the impression that a withdrawel for a primary home was not subject to the 10% penalty, only subject to taxes.


The government has said that 401k plan administrators may offer that option, not that they must offer it, so you need to find out from your plan administrator if it's offered. Also, the option only exists for the purchase of your first home.
Link Posted: 3/15/2011 6:22:10 PM EST
my honest opinion is I would not touch the 401k. Think about it you are 42 years old you will need it later.

Also you can take money out if you can show hardship. A hardship withdrawal is allowed however you have to prove in no certain terms why you need this money.

Look into this perhaps your situation after a divorce will qualify you.

Link Posted: 3/15/2011 6:30:48 PM EST
speaking of 401k's...and divorce.....

can 401k dollars be withdrawn as part of a divorce settlement without penalty?
Link Posted: 3/16/2011 4:16:42 AM EST
Originally Posted By Burnsome-:
speaking of 401k's...and divorce.....

can 401k dollars be withdrawn as part of a divorce settlement without penalty?


You mean, like, if you dutifully save, and contribute to your 401K, but your wife,who makes more than you, spends her money on vacations with her friends doing whatever and whoever she wants, then yes, at the time of the divorce in order to equalize the accounts, she will receive funds from your account through a Qualified Domestic Relations Order. At that point the funds can be rolled into her account, or, if shes a financial genius, party whore, like my ex, it can be taken as a cash distribution that is taxable, but with no penalty.
Link Posted: 3/16/2011 4:20:06 AM EST
Originally Posted By Bubbles:
Originally Posted By DaddGoneMadd:
I was under the impression that a withdrawel for a primary home was not subject to the 10% penalty, only subject to taxes.


The government has said that 401k plan administrators may offer that option, not that they must offer it, so you need to find out from your plan administrator if it's offered. Also, the option only exists for the purchase of your first home.


I will reread my plan, but I believe the "first home" portion, read that it just wasn't for a secondary or vacation home, not your virgin real estate purchase.
Link Posted: 3/16/2011 5:54:23 AM EST
You mean, like, if you dutifully save, and contribute to your 401K, but your wife,who makes more than you, spends her money on vacations with her friends doing whatever and whoever she wants, then yes, at the time of the divorce in order to equalize the accounts, she will receive funds from your account through a Qualified Domestic Relations Order. At that point the funds can be rolled into her account, or, if shes a financial genius, party whore, like my ex, it can be taken as a cash distribution that is taxable, but with no penalty.


yes sir...exactly like your ex....thanks very much

sorry, didnt mean to potentially hijack the thread but was curious.
Link Posted: 3/17/2011 6:09:48 AM EST
I used my 401k to get the down payment on our house. I withdrew it, did not take the loan option as we were shooting for a monthly payment we could afford on my salary alone, and paying it back as a loan, even to ourselves, would have put us WAY over that number.

Your plan may vary.
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