| Roth IRA Loan - What Happens When I Change Jobs? |
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adt2
New Member
Cash: $ 0.65
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| Roth IRA Loan - What Happens When I Change Jobs? |
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I had to take out a ~$10,000 loan from my Roth IRA late last year to help my mother avoid foreclosure. I'm currently paying it back through automatic payroll deductions.
I am considering taking a new job, and I'm wondering what happens to the loan if I do? I understand that with a traditional 401k, the loan becomes due immediately and failure to pay results in the penalty and taxes being applied...but I have no idea what happens on the Roth side. Doesn't seem like it would apply, since all my contributions have been after-tax - but I don't want to take a new job and suddenly find myself with a huge new debt to pay off.
Thanks in advance for any insight you can offer.
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Fri Feb 15, 2013 2:43 pm |
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littleroc02us
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From what I know you have 60 days to pay off the loan or it will be taxed at your personal income tax rate + 10%.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Fri Feb 15, 2013 4:59 pm |
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adt2
New Member
Cash: $ 0.65
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Joined: 15 Feb 2013
Location: Houston, Texas
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Huh. How do they know the part I withdrew wasn't the part I already paid taxes on? Remember, my contributions were all after-tax.
I can understand paying tax and a penalty on any earnings I withdraw, but I have a hard time swallowing additional tax & penalty on money I've already paid taxes on.
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Fri Feb 15, 2013 5:03 pm |
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littleroc02us
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Cash: $ 384.35
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Technically this is how it works. If you contribute 10k in to your Roth IRA and over the next 5 years you earn interest of lets 3k, you can withdrawl and never have to pay back the 10k (you'll fill out an 8606 irs form) because it's principle, but if you take out let's say 11k, you'll pay tax on the 1k? Does that make sense?
Risk comes from not knowing what you're doing. (Warren Buffet)
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Fri Feb 15, 2013 7:42 pm |
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adt2
New Member
Cash: $ 0.65
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Joined: 15 Feb 2013
Location: Houston, Texas
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Okay, that makes more sense. I took out less than what my after-tax contributions have been (i.e. I didn't take out any earnings, only contributions) so I think I'm okay.
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Fri Feb 15, 2013 7:59 pm |
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allysagirl
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Hi, if you take another job and you have a loan I think they will give penalty because like what you have said, it is an automatic payroll deductions. I think the best thing that you have to do is ask this to the bank that what if you change job. They will answer your question and at the same time you will not have a problem. 
Please do not hide links to your site under post text
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Sat Feb 16, 2013 6:24 am |
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