Reply to Explain to me why it's stupid to take $$ from a 401K for a down payment

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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]OP asked about "taking $$ from 401k for a down payment".  That is a withdrawal, and there is a tax penalty.

It's perfectly fine to say "it's a lot better to take a loan and not a withdrawal because there's no tax penalty and the interest paid on the loan gets credited to your 401k" but people who make blanket statements about "there is no penalty" should be more careful.

[/quote]

Ahhhh, thank you for breaking it down.  I'll rephrase one of my answers above pertaining to a 401k loan as this:

[b]It would be so stupid to straight-up take money out your 401k, pay the 10% early withdrawal penalty, and then pay the income tax on the distribution, that I hadn't even considered someone would be dumb enough to do it.  You could be losing 30%+ of your own hard earned money on a terrible financial decision in the heat of the moment over a house down payment.[/b]

I automatically assumed that we were talking about a loan here...which would be totally fine if you had a stable job.  Just be aware of the consequences if you happened to no longer hold that job that your 401k loan originated through.

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