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Reply to "Explain to me why it's stupid to take $$ from a 401K for a down payment"
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[quote=Anonymous][quote=Anonymous]There is no tax penalty; what are all the posters re tax penalty talking about?[/quote] There's not a tax penalty for a run-of-the-mill 401k loan that's borrowed and then paid back in due time. If you have a very stable job, I wouldn't even sweat it if you need the money. The trouble comes when, for example, someone took a out a max $50k 401k loan and then soon lost their job. If that $50k isn't paid back into the 401k immediately, the IRS will classify this as a taxable distribution as well as assessing a 10% penalty for an early withdrawal. In the 25% bracket, the IRS would be expecting around $17,500 by April 15th the following year. A number that big is basically insurmountable for someone who was already borrowing money from their retirement and now has a mortgage as well. I've seen it happen to former co-workers firsthand and it's not pretty.[/quote]
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