(Closed) Financial 401K Bees….help me bees!

posted 6 years ago in Money
Post # 4
Member
3618 posts
Sugar bee
  • Wedding: November 2011

It is not like a savings account. You have to pay it back, and if it’s not for one of the approved reasons (higher education, first home, hardship) you have to pay 10% penalty and income tax.

Post # 5
Member
893 posts
Busy bee
  • Wedding: May 2013

@Earlybride:  First of all, there is a difference between a loan and a distribution.  You shouldn’t take money out of your 401k unless it’s for a qualified “distibution.”  You’ll get taxed on the money you take out plus a 10% penalty.  Second, if you’re borrowing from your 401k (a loan), you will have to sign a contract detailing the interest rate and how much you pay back.  Finally, if you’re really considering it, have the patience to call and learn about your 401k; otherwise, you are not ready to even make such a decision if you don’t read up.

Post # 6
Member
5786 posts
Bee Keeper
  • Wedding: May 2011

If you take a loan against your 401k there is no tax penalty. They deduct a set amount from your paycheck (with interest) depending on how big the loan is/the length of the loan. The interest is fairly low. If you leave your job you have to pay the entire loan back to avoid penalties. You can only borrow a certain % of your 401k principal (50%?)

If you take a distribution from your 401k there is a penalty (with a few exceptions, i.e. first home). Avoid this at all costs.

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