Loan out of 401(k) or IRA?

does anyone know how it would work for adoption expenses?

Is that considered one of those financial hardships or circumstances where I could do this?

Re: Loan out of 401(k) or IRA?

DH was allowed to withdraw 10K towards the purchase of a new home. I was not without the taxes and penalties. I would call the company who handles your 401K and ask them, I think it varies. but I think that would fall under hardships.

Re: Loan out of 401(k) or IRA?

I don't think it qualifies as hardship but you can borrow against your 401K (which we plan on doing in our case!).


But look into:

- Some companies do offer adoption benefits. So check with your HR dept.

- Federal Adoption Expense Tax Credit
For tax year 2010, the federal adoption expense tax credit is a maximum of $13, 170 per adoption (subject to income limitations).

- Nonrecurring Adoption Expense Reimbursement
Families who adopt from the public system may be eligible for reimbursement of adoption-related expenses, such as homestudy, travel, and attorney costs. More information: http://www.nacac.org/adoptionsubsidy/stateprofiles.html.

- State Tax Credits
Several states have tax credits for adoptive families, sometimes restricted to those adopting from that state's public child welfare system. Contact your state adoption unit for more information.

- Grants and Loans
Some adoption agencies and organizations offer adoption grants and/or low-cost loans. Agencies with such programs include Holt International, World Association for Children and Parents (WACAP), and Dillon International. (See the adoption agency listings in at www.theadoptionguide.com for contact information.) For instance, the Gift of Adoption Fund, www.giftofadoption.org, and A Child Waits, www.achildwaits.org, offers grants and loans for families adopting internationally. Helpusadopt.org, a startup financial assistance grant program, awards grants twice per year to prospective adopters who face significant financial obstacles.

Re: Loan out of 401(k) or IRA?

Definitely check with your 401k provider. Mine allows us to borrow against OR withdraw (with penalties of course).

Also see if your employer offers any reimbursement for adoption expenses.

And everything smdl said too

Re: Loan out of 401(k) or IRA?

My firm and DH's firm has adoption assistance.

Just trying to see how to front the cash.

Need to come up with about $8K initially.

Then advertising expenses.

A lot will come back to us after it's all said and done but need to have cash flow and I don't want to take it out of emergency savings and deplete the account.

Re: Loan out of 401(k) or IRA?

I'm pretty sure if you withdraw from your IRA you will have to pay the penalty (10%) plus taxes.

I think your best bet to avoid this would be a loan from your 401, or a bank loan.

Check with your accountant though.

Re: Loan out of 401(k) or IRA?

Re: Loan out of 401(k) or IRA?

DH will freak about the cost. Taking it from 401(k) is painless at first but I want to make sure I can put back as much as possible when the assistance kicks in.

Doing private domestic and it could cost $20-30K...maybe a bit more. With $10K in adoption assistance and a tax deduction, not sure how much that would be but we could recoup at least half in my estimation. I hate thinking about it in $ terms but it's reality.

In the end we get a kid and that's worth so much more.

Re: Loan out of 401(k) or IRA?

Re: Loan out of 401(k) or IRA?

borrowing from your 401k would depend on the plan your employer created. not every plan allows for loans. the max you can borrow is 50% of your vested amount and you have 5 years to pay yourself back.

paying it back faster, like when you get an income tax refund, can be done, but the specifics depend on the plan, your employer, and the tpa.

adoptions do not qualify for a hardship withdrawal from a 401k (i don't know about iras)

although, this is a very worthy cause, i always ask people to make sure they've thought through borrowing from a 401k. you'll be paying yourself back with post-tax money... so you'll be taxed twice on that money. there is also the job security angle.

again, bringing a baby into your life/home is definitely a worthy cause for some financial wrinkles.

best of luck to you!!

Re: Loan out of 401(k) or IRA?

Re: Loan out of 401(k) or IRA?

Re: Loan out of 401(k) or IRA?

A few years ago DH took out a 12K loan from his 401K and we're paying about $250/month for 5 years back into it. It's automatically deducted from his paycheck. I don't know any other details about it, b/c he handled it all. Three are no penalties, b/c we're just paying it back to his 401k. It was a no brainer at the time when we needed it.