I was deemed totally disabled by the social security administration and receive SSDI.
This obviously is not enough to cover my expenses including mortgage and my house will be Foreclosed upon within the next 5 months. My question is this:

What are the penalties if I withdraw funds from my 401K to build or buy another house in another area with a lower cost of living. Can I do this, and if so is this money counted as regular income?


Thank You

There is no penalty for withdrawing the money; you can withdraw if you are permanently disabled with proper documentation even if you are below 59 1/2.

Since the 401k money has never been taxed, you have to declare it as income the year you withdraw it.