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

Asked almost 2 years 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

Related Topics

Employee 401k plans

Employee 401k plans are common retirement benefits. Employers may match a percentage of employee contributions to the plan to encourage retirement saving.

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