Hello,
I'm laid off from my place of employment and I'm currently in college full time. I need more money than I'm drawing on unemployment. My home, truck, debt and utility bills are more than I'm drawing. The only source I have is my 401k...
I took a loan out earlier last year from the 401k, not knowing I could only have one loan out at a time. So now I feel my only option is to close the account and take whatever is leftover after taxes... Can I do that? How much will I be paying on penalties and taxes.
I know I need my retirement fund, but I won't have a house to retire in if I keep going at the rate of $-800.00 a month. I'm already a month behind on just about everything.:( Thank you in advance for any help you may be able to give.
Melody

Melody:

You CANNOT withdraw from the 401K, but only as a last resort.

You will pay normal taxes (both federal and state on whatever is withdrawn, PLUS pay a 10% Early Withdrawal Penalty. The total tax will probably be about 30% for you, but can approach 50%.

If you do this, they will withhold 20% when they make the distribution, but that may not be enough to cover the tax liability, so be ready to PAY come tax time next year.

If you took out a loan and you are no longer with the company, then that loan would be considered a withdrawal. In the year you lost your employment. So you will have to pay a 10% penalty plus taxes on that amount.

You MIGHT qualify under hardship rules if the withdrawal is to avoid foreclosure.