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    mirwin99's Avatar
    mirwin99 Posts: 1, Reputation: 1
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    #1

    Sep 17, 2007, 09:20 PM
    Closing a 401K account while you have a loan
    Does anyone know if you can close a 401K account with an employer while you have a loan that you are paying back? I am in serious need of money and that is the only option I can think of. Any help would be appreciated!
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    Sep 18, 2007, 02:15 PM
    I believe by law you can only borrow up to 50% of the value of your 401(k), so no, you can't take out a loan and then withdraw the remainder of your balance. I believe what would happen is the loan would no longer be considered a loan but would be redefined as a premature withdrawal, which would generate the 10% early withdrawal penalty plus income taxes owed.
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