401k Loan & Resignation

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Anonymous

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Does anyone have recommendations for paying back a 401k loan if you resign from your company? Do you just take a hit, and pay the taxes on it? Or if not enough cash, borrow from home equity loan to pay it off before resigning?

I have limited time to decide so please spare the comments about never borrowing from your 401k. I viewed it as a positive because the interest I was paying went right back into my 401k. In essence, I was borrowing from myself. Still learned a valuable lesson since I need to come up with cash quickly.
 








I'd pay it back if I could ... you're talking as much as a 45% tax bite (plus state taxes if applicable), which includes the 10% penalty tax rate. Unless your employer plan allows you to continue to pay the loan after you resign (and I'm not sure if any plans allow that), trying to come up with the cash to pay off the loan would be best.

Otherwise, I'd borrow to cover the loan (either home equity or unsecured loan, if possible).
 








Anonymous said:
I'd pay it back if I could ... you're talking as much as a 45% tax bite (plus state taxes if applicable), which includes the 10% penalty tax rate. Unless your employer plan allows you to continue to pay the loan after you resign (and I'm not sure if any plans allow that), trying to come up with the cash to pay off the loan would be best.

Otherwise, I'd borrow to cover the loan (either home equity or unsecured loan, if possible).
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That's a lot in taxes..... too much. I don't think my company will allow me to continue paying it back since it comes directly out of my paycheck. Guess it's cash from my savings plus borrowing or only the latter.

Thank You!
 
















Anonymous said:
Does anyone have recommendations for paying back a 401k loan if you resign from your company? Do you just take a hit, and pay the taxes on it? Or if not enough cash, borrow from home equity loan to pay it off before resigning?

I have limited time to decide so please spare the comments about never borrowing from your 401k. I viewed it as a positive because the interest I was paying went right back into my 401k. In essence, I was borrowing from myself. Still learned a valuable lesson since I need to come up with cash quickly.
Click to expand...

You didn't read the rules?
 
















Some might argue that's a good thing. A bank loan would still require monthly payments even though she's unemployed. But if she thought it wise, she always could have taken an early 401(k) distribution, at her discretion, and not have it forced on her.

Hope that your daughter finds a great new job quickly and that figuring her taxes isn't too complicated!
 








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