[oracleson]

Hello,

I have a new job and my 401k($18k) with my prior company is still at my former company's plan admin which is also my new employer's admin!

Combine income for my wife and I are in the 6 figures. Income goes to the "big"house payment and with a new baby, I am thinking of cashing my 401k out or take out as loan to pay for the baby's medical bill ($1.5k), my current MBA expense ($2.8K) and the remainder on my credit card.

What is the best approach to minimize my tax liability? Loan on $9K or take out distro minus taxes amounting to 9k?
What is the interest on the 9k loan ? (if that's the suggested approach from the "team)
Roll my $18K to an IRA and take hardship withdrawal on the $1.5K and $2.8K(reducing tax penalty of 10%) and pay IRS and state for the remainder (subject to 10% and tax bracket taxes)

Please advise.
Thanks

[AtlantaTaxExpert]

Your BEST approach is NOT TO TOUCH the 401K at all. That money is intended for retirement and NOT to meet your daily living expenses. Find other means to finance those other expenses.

If that is not an option, go with the loan option. You will have to transfer the 401K from the old job to your new job, as the old job custodian will not allow youto borrow against it as they have NO salary against which to draw a payment. Even though it is the same custodian, it is NOT the same account; a transfer WILL be needed.

[ScottGem]

I totally agree with ATE. If you really need to access that money, do it through a loan. The interest you pay on a 401K loan goes into your account. So while you are paying interest you are paying it to yourself.

[AtlantaTaxExpert]

Yes, paying interest to YOURSELF beats paying someone else!