| Cash out 401k for 1st home...kind of... |
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jab1617
First Time Poster
Cash: $ 0.25
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Joined: 07 Apr 2005
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| Cash out 401k for 1st home...kind of... |
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Hi
Before I was married in Nov. 2004, my at the time Fiance bought a house in Oct 2003 (so she bought a house by herself BEFORE we were married a year later). My name is not on the deed at the present time.
We would like to purchase a property to serve as a 2nd home, predominantly as a rental and to use for a few weeks out of the year, both as an investment and as a vacation home.
My question is, can I withdraw from my 401k and avoid the 10% penalty since I personally haven't bought a first house? Or, since I'm now married, has my personal right to avoid a 10% penalty been forfeited?
Thanks so much, you all are so helpful
Jeff B.
Harrisburg, PA
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Thu Apr 07, 2005 1:36 pm |
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Andrew
Admin
Cash: $ 460.25
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Joined: 02 Nov 2003
Location: Texas
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Hey Jeff.
That's a good question.
There are some subtleties here involving your age, loan vs. withdrawal, hardship vs. otherwise, and primary residence vs. 2nd home.
I'm thinking that the home would need to be a primary residence to count.
Although I've read otherwise, this IRS page indicates that in no way can the penalty be avoided for withdrawals before retirement age, although a 401k loan might be a possibility...
quote:
f you are under the age of 59 1/2, you cannot withdraw funds from your 401(k) plan to purchase your first home without being subject to a 10 percent additional tax on early distributions from qualified retirement plans. However, depending on the rules for your 401(k) plan, you may be able to borrow money from your 401(k) plan to purchase your first home. Your plan administrator should have written information about your particular plan that explains when you can borrow funds from your 401(k) plan as well as other plan rules.
http://www.irs.gov/faqs/faq-kw7.html
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Thu Apr 07, 2005 3:23 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
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Joined: 05 Oct 2004
Location: Illinois
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I believe Andrew has it right - it must be your primary home, and a 401(k) only allows for a loan, not a withdrawal (without penalty).
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Fri Apr 08, 2005 12:15 pm |
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