04-07-2012 12:27 PM
Someone asked me if I knew and I didn't, so thought I'd bring it here...
If someone has a loan on his 401K and wants to do a hardship withdrawal for the purchase of a home, is there any benefit to paying the loan down/off first? If he did, I would think that would increase the amount available to him, yes? He's a young'un, so not much in the 401K as of yet.
04-07-2012 10:54 PM
You are correct.
The only advantage I see in repayment the current loan would be that a withdrawal won't have to be paid back and it will enable him to get more money @ withdrawal.
04-08-2012 04:10 AM
If you really want to help then IMHO I would advise him not to buy the home if he has to do the 401k withdrawal to do so.
04-08-2012 07:22 PM
Well, yeah, BTDT, but it's up to the horse to drink. Just trying to learn myself while I teach others.
04-08-2012 07:51 PM
only withdraw the amount not out on loan..... then your penalty is only on that smaller amount.
if you pay it down/off with your cash.... then you would be withdrawing more.... and penalized on that higher amount.
04-16-2012 08:28 PM
Is there a head-smacking smiley? That makes perfect sense (and I don't know why I didn't figure that one out on my own, OY!) Thanks!
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