[user_needs_help]

I'm currently about 3 months behind on my mortgage payment. I've started a new job about a year ago and am trying to make ends meet. This current job has a separate 401k plan, and I still have funds from my last job in a 401k that is less than $7,000. Would it be worth it to withdraw from my previous 401k plan to catch up on my mortgage payments? Any help would be MUCH appreciated. Thanks!

[ebaines]

Please be aware that if you do take the $7K withdrawal from the old 401(k) plan you will owe income tax and the early withdrawal penalty of 10%. I assume here that when you left your previous employer you were under age 55. The plan administrator will automatically withheld 20% for federal taxes - whether that amount is sufficient depends on your tax bracket. They will not withhold the 10% penalty amount nor state/local income taxes, so do NOT spend the entire amount that comes in the check - you will have to come up with cash next April for your 2011 tax bills.

[user_needs_help]

Thank you for your response! So the 10% penalty will need to be taken care of come tax time, correct?

[ebaines]

The 10% penalty is added to your regular taxes - whether the 20% that they automatically withhold is adequate to cover both regular taxes and penalty is impossible to say without a lot more information. There's also state/local taxes (if applicable), which they do NOT withhold for, so you will have to pay that piece come tax time for sure.