The details: I am 33, have a little under 20,000 in a 401K that was started with a company that I am no longer with. Thinking about buying a house and using the 401K to help with the down payment. I borrowed against the 401K some time ago and still owe 1,700 to myself. While, I am loath to cash this in my other consideration (which is a little out in left field, but my concern none the less) is that our entire financial system is going to fall apart in roughly 20 - 30 years when the world runs out of oil.

So, with out getting into a hypathetical; does anyone no the rules and regs regarding cashing in a 401K when you owe money on a "loan" and also, I've seen everything from 35% penalties to 50% is there a calculator to estimate?

I do have an alternate 401K at this time, which is excellent, so, there are alternative retirement plans.

The details on what you owe when you cash in your 401(k) are:

1. The outstanding loan is reclassified as a withdrawal.
2. You pay income tax (federal as well as state/local income tax, depending on where you live) on the withdrawal, including the portion of the loan that is reclassified as a withdrawal. You can expect the plan administrator to automatically withhold 20% of the amount of withdrawal for income tax. The actual tax rate will depend on your financial circumstance, but remember that your adjusted gross income will be $20K higher than it otherwise would be, which may put you into a higher tax bracket.
3. You will also owe a 10% early withdrawal fee on both the cash amount of the withdrawal plus the portion of the loan that gets reclassified as a withdrawal. The plan administrator does not automatically withhold this - so be sure to keep enough cash on hand to be able to pay this with your income taxes.

So adding it all up - if we assume you end up in the 20% federal tax bracket, and assume that you state/local income tax is 5%, then you will owe a total of about 35% in taxes and penalties. Of course, your mileage may vary.

I think you would be better off paying back the $1700 loan and then rolling the account to a roll-over IRA. This would give you bit more control of the account, and given your fears about the long-term viability of the market would allow you more freedom to move the investment into something that you have faith in (for example: government T- Bills, mutual funds that invest in gold or other commodities). Mind you I am not advocating such an investment - but if that's what you want you can do it through an IRA with more flexibility than your 401(k).