Is this just federal? What is state?
Excellent advice, unless you have a way to get a return greater than the 30+% loss.
OK Guys. Getting or giving tax advice online is kinda' like reloading info. Use at your own risk. The answers given above are correct, including the possibility of exclusion from the general rules. One thing I would like to stress is that the amount withheld from your retirement plan withdrawals is not the amount of tax you owe on the withdrawal. It is just a deposit, like the withholding on your paycheck. Your actual tax is calculated when you complete your return for the year. Depending on your total income from all sources, you may be due a refund or you may owe additional tax. Since you are adding the amount withdrawn on top of your regular income, it will be taxed at your highest tax rate.
Lots of truth in this ^^^^^ (esp. the part about taking free internet advice). Also, good info in the answer posted earlier to the OP's question.
This is correct. I did this last year (2014). Except I did not pay taxes (it was a Roth so income taxes were paid before the investment) and I did not pay penalty (since the money was used for down payment on a home, the penalty is waived). So for me it wasn't bad decision at all aside from forfeiting any compounding earning on the investment.
Looking at my 511 I don't believe the state assessed a penalty. Just the normal income tax on the distribution.
No doubt
Yes,
It was not growing, It was a dormant account of my wifes, I will put all of the money I end up with on the house.
say I borrow $260k for the house.
@ 4% interest I would pay back a total of $446,860.72 over 30 years.
Now say I borrow 240k I would pay back $412,486.82
I had 31K in 401K
assuming I end up with $20k Paying it all on the house will save me a total of $34,374 over the life of the loan.
All this not to mention, "The .gov will eventually get to your 401k just like they did social security." I am building up equity with it now instead of over the next 35 years until I retire.
I had one like that. We rolled it into an IRA with a 30 year average of 12%. It did 34% the first year (last year) so we were stoked but also realize that's just 1 year. Anyway no taxes(yet) or penalty to roll it.
