I want to withdraw from my 401k to prevent foreclosure and was told I would need to pay taxes up front and a penalty. Does this mean I have to pay the taxes before I can withdraw the money or do they deduct the taxes/penalty from my acct ?

When you make the withdrawal, 20% will be withheld as a down payment on the tax owed.

You will pay state and federal income taxes on the full distribution, PLUS a 10% Early Withdrawal Penalty.

Have you considered taking a LOAN from the 401K? That is the BETTER option, as no tax or penalty will be due as long as you pay the loan back. While you pay interest on the loan, the interest is credited to your 401K, so you are paying the interest to yourself.

First your plan as to allow in service withdrawals. Not all do. Second, the penalty is usually due when yyou file your tax return. Most plans will WITHHOLD 20% towards your final tax liability.

Bottomline is withdrawing from your 401K is a bad idea. It should only be used as an absolute last resort. Considering the amount you lose in taxes and penalties as well as the loss of income on the funds, it rarely makes sense to do an inservice withdrawal.

I want to withdraw from my 401k to prevent foreclosure and was told i would need to pay taxes up front and a penalty. Does this mean I have to pay the taxes before i can withdraw the money or do they deduct the taxes/penalty from my acct ?
I had already taken a loan for my son's college so I'm still paying on it. I don't want to withdraw any amount but because of the foreclosure I'll need to and it'll get me current so I'll be able to start the new year on a positive note. I got behind on my mortgage because my mother passed away and had to pay the entire funeral so I used my mortgage savings and now I'm trying to catch up.We make enough to pay our mortgage but fell behind 3 months because of funeral.

I still don't see the justification. Talk to your lender, explain the circumstance and see if they will adjust the mortgage adding the arrears to the end of the loan. Or some other accommodation.

I've tried 5-6 times to do that. Maybe it's just Wells Fargo, but they want the total payment and no less. I can't figure it out because I purchased the house in 2004 and made my payments on time until my mother passed away and now they won't work with me. My credit is not that good to get a loan from anywhere else. We've thought of everything but sometimes you need to do things you don't want to do and hope it works out. I guess the positive is that we'll be caught up with the mortgage and hopefully can resume contributing to our 401k.

If the choice is taking the 401K distribution (and pay the taxes and punitive fee) or lose your house, the 401K distribution wins In my opinion.