What is involved in cashing out a 401k to buy a home?

Answer by  tamarawilhite (17883)

You will owe income taxes AND 10% penalty on the money pulled out from a 401K. Taking 100K from a 401K results in 15% income taxes plus 10% penalty, so you only keep 75K. Use Roth IRA funds instead; 10K can be taken out penalty-free to buy a first home.

Answer by  stephanie (20)

Contact HR dept or company managing your 401k ask about penalties associated with drawing out 401k. Most charge 15% interest as you saved without paying interest, then 10% penalty (their maybe is a loophole being a home).They will send you papers takes about 2 weeks.

Answer by  Deem (199)

Cashing out a 401k to buy a house will probably require payment of fees and taxes associated with the withdrawal of funds from the 401k. Additionally, there may be penalties that you have to pay, depending on the terms of your particular 401k and whether this you are a first time home buyer.

Answer by  brian7754 (243)

Just contact the custodian of the 401(k) and ask for a first-time homebuyer distribution. You can't use 401(k) money for a house if you've owned a home before.

Answer by  Daigle83 (66)

When you make an early withdrawal from a 401K you'll be assessed a ten percent penalty and the withdrawal amount will be subject to ordinary income tax. In addition, the withdrawal amount will increase your yearly income and therefore will most likely put you in a higher tax bracket for the year.

Answer by  tamarawilhite (17883)

This is unwise, because you pay income taxes on it. However, you can pull up to $10,000 out of a Roth IRA without tax penalties to buy a first home.

Answer by  NobodysHome (385)

Cashing out a 401(k) before the retirement age results in severe tax penalties. Depending on your situation you may be able to make this up with homebuyer tax credits.

Answer by  Rose (6804)

It is not advised that you cash out your 401K at any time till you reach retirement, even to add in purchasing a home. When you cash out a 401k you are penalized to a point that makes it not worth it, you are also taxed heavely on the funds you remove.