Is there anyway to avoid the 10% penalty for early 401k withdraw ?

Asked over 1 year ago - Palos Verdes Estates, CA

i withdrew money from my 401k for a down payment on a house (not my first home purchase & not 59). we had to sell our original house do an interest only loan & we could not refi the loan. we came out of the sell on the house with $12k not enough for another house, so i withdrew from my 401k.

Attorney answers (2)

  1. Susan Lynn Meter

    Contributor Level 7

    Answered . While you may have been eligible for a hardship distribution for the purchase of the house, unfortunately the hardship does not avoid income tax and the early withdrawal penalty of 10%. There is a first time homebuyer exception to the early withdrawal penalty but this is for distributions from an IRA, not a 401(k) plan. Unfortunately you will have to pay the penalty.

  2. Andrew B Gordon

    Pro

    Contributor Level 11

    1

    Lawyer agrees

    1

    Answered . You may be in luck! One of the exceptions to the 10% penalty is that the early distribution was used for payment of a house OR if you do not qualify for that, it may be a hardship distribution. You should speak to a CPA or tax attorney to determine if you qualify.

    Andrew B. Gordon, Esq., CPA
    (847) 580-1279
    www.GordonLawLtd.com

    Andrew B Gordon is a CPA and attorney licensed to practice law in Illinois. The information provided here is for... more

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