Post # 1
If you decide to take money out of your 401K, how does it work??
Will they take more out of paycheck to pay it back?
DO they put interest on what you owe?
Do you owe that money back at all?? Or is it like a savings account, if u take money out, thats it, theres just less money in it, they dont tax u, or charge or whatever??
Im considering it, but cannot call the place right now. So Im asking the hive what their experience has been when they took money out of the 401K.
Thanks bees. Any info is appreciated!
Post # 4
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
@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
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.
Post # 8
It sounds like a nightmare to even do it once.