jack#211
New Member
Cash: $ 0.65
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Joined: 16 Oct 2015
Location: michigan
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| 401k loan default |
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I have been off work since Jan of this year with a injury and have been receiving short term disability. If I cannot return to work by Jan 2016 I will loose my job and looks like disability will be my only option. I have a 401k loan for $28000 that I have kept up the payments on but by the rules of the plan when my job is terminated the loan goes into default and I have no way of paying it off priorto this. The balance of my 401k is $106000 and $9000 of that is 401 k Roth, is there any way this could be used to pay down the loan so I'm not hit as hard when the loan goes into default? Any help would be greatly appreciated
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Fri Oct 16, 2015 1:16 pm |
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littleroc02us
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Everyone thinking of taking a 401k loan and thinking there isn't a chance they'd lose their job, get sick or hurt should read this thread closely. IMO it's never a good idea to take a loan from your 401k. I'd sooner withdrawl my contributions from my Roth IRA which is tax free.
Sorry about your situation, but I needed to enlighten people that when they take risks things happen that are out of your control. I'd start by withdrawing your contributions from your Roth. Do you have money in savings or a car you could sell, or equity in your home? I wouldn't touch your 401k because they'll tax you 10% off the top and then your tax bracket in addition which could be a total of 40%. Good luck!
Risk comes from not knowing what you're doing. (Warren Buffet)
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Fri Oct 16, 2015 3:47 pm |
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oldguy
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But the loan won't "default", the lender will take the $28000 from the $97000 in your 401k. They will also withhold the $2800 10% penalty and a $5600 20% tax withholding. So you' ll get about $61000 when your 401k is closed out.
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Fri Oct 16, 2015 11:17 pm |
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jack#211
New Member
Cash: $ 0.65
Posts: 3
Joined: 16 Oct 2015
Location: michigan
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What if I were to quit instead of being let go? Would that be a different scenerio? Would I then be given the option to either leave it with the employer or roll it into a ira and just have the loan default to deal with?
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Sat Oct 17, 2015 12:57 am |
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jack#211
New Member
Cash: $ 0.65
Posts: 3
Joined: 16 Oct 2015
Location: michigan
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| 401k loan default |
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When you default on a 401k loan do they take the outstanding loan balance from the market value or vested value of your account?
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Sat Nov 07, 2015 11:33 pm |
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