I am 63 years old. Retired 3 years ago. Collecting SS, Pension, Tax Free Pension, VA disability pension. I have a 401K plan with about 162,000 in it. I would like to borrow 10,000 to buy a used travel trailer which would qualify as a second home.
I receive $500.00 a month from the 401K plan.
1. Can I take $10,000 from the 401K without penality - other than income tax.
2. Can I take a loan from the 401K plan?
I believe the interest in a qualifying 2nd home would also be tax deductible.
3. Would it be better to borrow the 10K from a bank?

1. Yes - you would pay ordinary income tax on the withdrawal (both federal come tax and state/local, if applicable where you live), just as you are already doing with your regular $500 monthly withdrawal. Theer is no penalty for making withdrawals after age 59-1/2.

2. No. Loans can only be taken by active employees. And yes, interest payments on a qualifying second home are indeed deductible.

3. Depends on what you foresee for the future and your risk tolerance. If the $162K in your 401(k) is your only retirement nest egg, you should take care to conserve the principal - it needs to last for 25 years or more. However, you are currently withdrawing at a rate of less than 4%/year, which is pretty conservative. If you took out $10K, then your withdrawal rate is still only 4%, which should be sustainable as long as you have a good diversified portfolio. Remember too that if you borrow the money the total cost of purchase once the loan is paid off would be more than $10K.