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Old 04-07-16, 10:08 AM   #1
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Anyone know 401k accounts well?

I'm in the middle of paying off a 401k loan for a house down payment. I'm currently looking at jobs outside my current company. Does anyone know how it would work if I were to get a new job who's 401k is through a different provider? Am I able to roll the loan over to the account and have payments come out of my paycheck like they are now? Or would I have to settle that loan in full before getting a new job?
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Old 04-07-16, 10:39 AM   #2
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I'm not sure if you can transfer it
but I do know if you don't pay it all off you have to pay taxes on the remaining amount
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Old 04-07-16, 10:41 AM   #3
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Re: Anyone know 401k accounts well?

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Originally Posted by Bacon View Post
I'm not sure if you can transfer it
but I do know if you don't pay it all off you have to pay taxes on the remaining amount
Yeah; I'm not looking to pay taxes and just lower my account balance. I would like to continue paying it off as normal but I'm concerned about my options if I were to take a new job. I'm hoping the loan doesn't lock me into working here.
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Old 04-07-16, 10:44 AM   #4
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Quote:
Originally Posted by Noonan View Post
Yeah; I'm not looking to pay taxes and just lower my account balance. I would like to continue paying it off as normal but I'm concerned about my options if I were to take a new job. I'm hoping the loan doesn't lock me into working here.
I'd call both 401k companies
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Old 04-07-16, 10:54 AM   #5
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Re: Anyone know 401k accounts well?

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I'd call both 401k companies
Call both companies but I'm pretty sure you have to pay off any loans before you leave. It doesn't lock you in but what you may end up doing is taking a bank loan to pay off the 401k loan. Once you get the new 401k setup you can possibly take a loan against that to pay off the bank loan.
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Old 04-07-16, 11:01 AM   #6
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Re: Anyone know 401k accounts well?

Contact your plan administrator but more than likely you will have to pay off the amount owed at once.
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Old 04-07-16, 01:03 PM   #7
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Re: Anyone know 401k accounts well?

I think The Bus is correct.

And I know it's water under the bridge at this point, but this is another reason why borrowing against a 401(k) is generally a bad idea. See Reason #5 on the linked list... http://www.investopedia.com/articles...easons401k.asp
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Old 04-07-16, 01:39 PM   #8
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Re: Anyone know 401k accounts well?

Quote:
Originally Posted by Noonan View Post
I'm in the middle of paying off a 401k loan for a house down payment. I'm currently looking at jobs outside my current company. Does anyone know how it would work if I were to get a new job who's 401k is through a different provider? Am I able to roll the loan over to the account and have payments come out of my paycheck like they are now? Or would I have to settle that loan in full before getting a new job?
I've been in the 401(k) business for almost 15 years, so this is my area.

Loans cannot roll over to another plan. Some employers will allow you to continue to make payments on the loan after you've terminated employment, but it's getting less common these days.

Your best bet is to pay off the loan in full, otherwise you'll have to default on the loan, and it will be considered a distribution, subject to taxes and a 10% penalty. If you do default, you'd get a 1099 in 2017, for tax year 2016.
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Old 04-07-16, 01:44 PM   #9
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Re: Anyone know 401k accounts well?

I took out a 401(k) loan for the same reason about 15 years ago, and switched jobs not long before it was fully paid off. It didn't lock me into the previous employer in any way, but the balance did come due upon my termination date (and would have been counted as taxable income for that year if I hadn't paid it off). I'm not sure if a rollover to another 401(k) was possible, since the company I moved to only offered a SIMPLE IRA at the time.
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Old 04-07-16, 02:28 PM   #10
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Re: Anyone know 401k accounts well?

Quote:
Originally Posted by Noonan View Post
I'm in the middle of paying off a 401k loan for a house down payment. I'm currently looking at jobs outside my current company. Does anyone know how it would work if I were to get a new job who's 401k is through a different provider? Am I able to roll the loan over to the account and have payments come out of my paycheck like they are now? Or would I have to settle that loan in full before getting a new job?
If you have a loan outstanding that loan stays with your old provider / company.
You will keep making payments on it, or just pay it off in full if you have the $.

An outstanding loan will not preclude you from participating in your new employer's 401k plan. You will have to write a check every month or do bill pay to satisfy your outstanding loan, it will not be easy and just come out of your check.

So you don't need to stay with your company if you have a 401k loan.

Hope that helps
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Old 04-07-16, 02:50 PM   #11
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Re: Anyone know 401k accounts well?

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Originally Posted by CPA-ESQ. View Post
If you have a loan outstanding that loan stays with your old provider / company.
You will keep making payments on it, or just pay it off in full if you have the $.

An outstanding loan will not preclude you from participating in your new employer's 401k plan. You will have to write a check every month or do bill pay to satisfy your outstanding loan, it will not be easy and just come out of your check.
That's only if his current employer's plan document allows for loan repayment after termination of service. As I mentioned above, that is becoming less and less popular with employers.
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Old 04-07-16, 03:17 PM   #12
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Re: Anyone know 401k accounts well?

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That's only if his current employer's plan document allows for loan repayment after termination of service. As I mentioned above, that is becoming less and less popular with employers.
Yes, it varies based on 401k company and your company.

In general, Fidelity lets you do it, for example, but the company has to have it in their agreement / policy with Fidelity also.

Only sure way to know is to call your HR and ask. I did so *before* taking out the loan to be sure, since my googling for answers led me to the same answer as above (which is sometimes).
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Old 04-07-16, 05:05 PM   #13
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Re: Anyone know 401k accounts well?

I went through the same experience, ended up taking a loan from my parents, it was a win-win situation, they had a bunch of retirement money sitting in money market accounts (in addition to other retirement investments), earning somewhere around 2%, so we wrote up a loan agreement with a full amortization table and I paid them the same rate I was paying on the existing loan out of my 401k (I think it was 6%). Then I just setup automated monthly payments through our billpayer service. It was fairly transparent for me, except for the loss of the dollar cost averaging aspect of repaying myself.
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Old 08-08-17, 11:05 AM   #14
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Re: Anyone know 401k accounts well?

So I'm looking to take some money out of my 401k for a down payment on a house. I had thought I read that that was one of the ways you can get money out without paying the 10% fee.

But it doesn't look like that's the case, it is still charging me tax and the 10%. Is that right?

Also, I have 2 options, PARTIAL WITHDRAWAL-PREAPPROVED or BEFORE-TAX WITHDRAWAL- PREAPPROVED, but it doesn't explain what the difference is?
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Old 08-08-17, 11:21 AM   #15
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Re: Anyone know 401k accounts well?

Contact someone in your HR dept or someone at the place where the 401K is. One thing to note though is generally you don't want to "withdrawal" for something like a house down payment, you want to take out a loan using the 401K balance as collateral. That might be why you are still seeing info about the 10% penalty.
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Old 08-08-17, 11:23 AM   #16
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Re: Anyone know 401k accounts well?

Joe - you can take the money out with no penalty. You just need to pay it back per the agreed to schedule -- with some nominal % extra. There should be no taxes paid on your behalf -- it's already taxed money in the account. If you default, all bets are off and as others have mentioned, you almost always have to pay it off before you leave your current company.

I did this 5 years ago and it worked well.
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Old 08-08-17, 11:24 AM   #17
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Re: Anyone know 401k accounts well?

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you don't want to "withdrawal" for something like a house down payment, you want to take out a loan using the 401K balance as collateral.
Yes, this... exactly.
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Old 08-08-17, 11:37 AM   #18
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Re: Anyone know 401k accounts well?

It says I'm not eligible for a loan:



Due to being unemployed. I'm not worried about being able to make the mortgage payment, it would actually be less than what I'm paying for rent now.
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Old 08-08-17, 12:13 PM   #19
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Re: Anyone know 401k accounts well?

Loans are only allowed for active employees, on just about any 401(k) plan, due to the fact that repayment is done via payroll deduction. You may want to do a rollover to a qualified IRA, and see if you can do a qualified first time home purchase. There are qualifications for that, and I would suggest consulting a tax consultant for help with that.
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Old 08-08-17, 12:36 PM   #20
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Re: Anyone know 401k accounts well?

Hmm, reading up on that a bit ... how do I know if I want to roll my 401k over into a traditional or roth IRA?

Right now, I've got about $360k in my 401k, don't plan on retiring for about 22 years, but haven't been employed with that company for 4 years now. Do most people roll over to an IRA after they leave a company?
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Old 08-08-17, 01:12 PM   #21
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Re: Anyone know 401k accounts well?

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Originally Posted by joeblow69 View Post
Hmm, reading up on that a bit ... how do I know if I want to roll my 401k over into a traditional or roth IRA?

Right now, I've got about $360k in my 401k, don't plan on retiring for about 22 years, but haven't been employed with that company for 4 years now. Do most people roll over to an IRA after they leave a company?
I don't know about "most people", for many it's not optional (I was forced to rollover my 401K when I left my last employer). But since it is optional for you, it depends on whether you're happy with investment options and fees with your 401K. As for rolling it to an IRA, if your 401k was traditional (ie pre-tax contributions), rolling to a Roth IRA would require paying taxes on all of it. Not a decision that anyone here can truly advise you on without knowing a lot more info.

Note that the rollover process is a (dangerous) way to get a quicky 60 day loan. They cut the check to you, and you don't have to pay taxes on it if you deposit the same amount into a rollover IRA within 60 days.
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Old 08-08-17, 01:49 PM   #22
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Re: Anyone know 401k accounts well?

As others have mentioned, you can roll your 401(k) into an IRA, then you can withdraw up to $10,000 for a downpayment if you're a first-time homebuyer.

Some details here.
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Old 08-08-17, 01:50 PM   #23
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Re: Anyone know 401k accounts well?

FWIW, I would leave the 401k alone if you need more than $10k. I think it's generally advised to avoid drawing down a large amount on it prematurely unless if it's for an absolute emergency or critical need.

As for whether it makes sense to roll it over to a Trad IRA, yes check how the investment options compare. 401k investment options can vary wildly. Also, look into protection offered by IRAs and 401k's. I believe 401k's offer a little more protection (commercial creditors, etc.).
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