View Full Version : Can I borrow from my 401(k)?

Cased Heel
07-13-2005, 03:16 PM
I'm a young guy who just started a 401(k) account. I've heard you can borrow a % against your 401(k) account for the purchase of a home? Is this true? Or does it have to be a RothIRA that you borrow from? Are there penalties for doing this? Please help me. I hate the idea of banks making money off me. I'm like an old prospector or something. My goal is to pay cash for a home.

07-13-2005, 03:47 PM
You should check with your plan provider, but most 401K have a loan provision.

07-13-2005, 08:56 PM
Most 401(k)'s let you take out loans. You can typically take out up to 50% of your balance. The good thing is you pay the interest back into your 401(k) so you are basically paying interest to yourself.

However, if you lose your job or leave the company, you have to repay the loan or you lose your other 50% of your 401(k). Probably not a great idea - borrow it at 5% and deduct it on your taxes.

Jim Kuhn
07-14-2005, 01:13 AM
If you lose your job you dont lose your money. You have nn number of days (I think it is 60) to pay back the loan or they treat it as a withdrawal. This would mean you pay interest and a 10% penalty on the amount withdrawn. Please check with your tax advisor or research to ensure this information has not changed.

Thank you,

Jim Kuhn
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07-17-2005, 01:38 PM
Is it true that you will be paying the loan back with post-tax money + interest? What happens in retirement, aren't 401(k) dollars fully taxable?

Can you accelerate or pre-pay the 401(k) loan with lump sums?

I am also be concerned with the opportunity cost of not having my money invested inside the 401(k).

Dan Mezick
07-17-2005, 03:47 PM
I believe the law states you can take out all of the cash for 60 days if it is replaced into the same or another qualified 401K within 60 days.

This has nothing to do with any loan provision.

Consult your financial planner for specifics on this.

07-17-2005, 11:36 PM
I dont recommend borrowing money out of your 401 K unless you really need it.

If you have a ROTH ira and a first time buyer you could use 10 K if you are a first time home buyer.

I am not an expert in real estate but I heard there are loopholes where you could still be considered a 1st time buyer if you already own a home. Please consult with your local tax guy.

07-19-2005, 10:55 PM
You can just withdraw money without penalty from a 401K if you indend to buy a house with it. I did this last year. Only up to 10K though.