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kaklesmay
Love my baby boy!
Member since 9/05 1151 total posts
Name:
Kim
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OK, financial/tax people, help me out
I was advised to dump money into my SEP IRA because "I could withdraw up to $10,000 penalty free for my first home purchase".
So I did that, knowing I would need to withdraw it once I found something for some of my downpayment.
Now, Im doing a little more research and for some funds (ROTH) I am finding that it applies only to contributions made more than 5 years earlier. I have a Vanguard SEP-IRA.
Am I scr*wed?
(I searched the website and they didnt have any info. Im at work so I cant call Vanguard.)
TIA
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Posted 4/27/06 10:44 AM  |
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riniko
LIF Toddler
Member since 3/06 486 total posts
Name:
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Re: OK, financial/tax people, help me out
Does this help?
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| Posted 4/27/06 4:00 PM |
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Lisa
I'm a PANK!!!
Member since 5/05 22334 total posts
Name:
Professional Aunts No Kids
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Re: OK, financial/tax people, help me out
I took $10k out of my 401K when we bought our house. We had to pay the taxes on it but not the 10% penalty.
Im not sure if I answered your question 
either way, I wished we hadnt done it....we paid alot in taxes that year!!
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| Posted 4/27/06 4:10 PM |
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joann564
LIF Infant
Member since 9/05 266 total posts
Name:
Jo Ann
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Re: OK, financial/tax people, help me out
I took $10k out of my 401K when we bought our house. We had to pay the taxes on it but not the 10% penalty.
Im not sure if I answered your question
either way, I wished we hadnt done it....we paid alot in taxes that year!!
I am confused why did you have to pay the taxes on it?? Did you not pay back the loan?? Or was it not a loan? I borrowed 32k out of mine and pay it back every pay check for 5 yrs? I havnt paid any taxes on it since it was a loan and I pay the interest back to myself.
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| Posted 4/27/06 5:59 PM |
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Karen
Just chillin'!!
Member since 1/06 9690 total posts
Name:
Karen
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Re: OK, financial/tax people, help me out
Posted by joann564
I am confused why did you have to pay the taxes on it?? Did you not pay back the loan?? Or was it not a loan? I borrowed 32k out of mine and pay it back every pay check for 5 yrs? I havnt paid any taxes on it since it was a loan and I pay the interest back to myself.
401K money goes in pre-tax, so taxes are paid on it when it comes out as a withdrawal. Generally you are also hit with a penalty for early withdrawal, but there are a handful of ways to avoid the penalty.
Loans are a different thing - you are only "temporarily" borrowing the money. With a withdrawal once it is out, it is out.
Message edited 4/27/2006 6:03:01 PM.
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| Posted 4/27/06 6:02 PM |
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riniko
LIF Toddler
Member since 3/06 486 total posts
Name:
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Re: OK, financial/tax people, help me out
Posted by joann564
I am confused why did you have to pay the taxes on it?? Did you not pay back the loan?? Or was it not a loan? I borrowed 32k out of mine and pay it back every pay check for 5 yrs? I havnt paid any taxes on it since it was a loan and I pay the interest back to myself.
Joann, what kind of interest do you have to pay when you borrow from your 401k? After all it is a loan to yourself.
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| Posted 4/28/06 9:14 AM |
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Charly
LOVE!
Member since 5/05 12578 total posts
Name:
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Re: OK, financial/tax people, help me out
I also did it as a loan. Basicially if you take out a regular loan from your 401K you have to repay w/in 5 years. If the money is for your 1st house and you take it as a loan they let you repay it over 10 years (reducing the monthly payment). My interest rate was 5.5% fixed.
If you just withdraw it and not take it as a loan you need to pay tax on it since the money was deposited pretax.
Hope that helps.
Message edited 4/28/2006 10:54:56 AM.
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| Posted 4/28/06 10:53 AM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: OK, financial/tax people, help me out
Posted by Charly
I also did it as a loan. Basicially if you take out a regular loan from your 401K you have to repay w/in 5 years. If the money is for your 1st house and you take it as a loan they let you repay it over 10 years (reducing the monthly payment). My interest rate was 5.5% fixed.
If you just withdraw it and not take it as a loan you need to pay tax on it since the money was deposited pretax.
Hope that helps.
Do you have to repay it sooner if you leave your job?
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| Posted 4/28/06 11:04 AM |
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Charly
LOVE!
Member since 5/05 12578 total posts
Name:
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Re: OK, financial/tax people, help me out
Posted by Blu-ize
Posted by Charly
I also did it as a loan. Basicially if you take out a regular loan from your 401K you have to repay w/in 5 years. If the money is for your 1st house and you take it as a loan they let you repay it over 10 years (reducing the monthly payment). My interest rate was 5.5% fixed.
If you just withdraw it and not take it as a loan you need to pay tax on it since the money was deposited pretax.
Hope that helps.
Do you have to repay it sooner if you leave your job?
It totally depends on your company's policy. That's a greqt question to ask prior to taking the loan. In my case I was able to leave my job and continue to repay monthly via a payment book. My friend however was not so lucky, she had 60 days to repay the loan when she switched jobs.
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| Posted 4/28/06 1:38 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: OK, financial/tax people, help me out
Posted by Charly
Posted by Blu-ize
Posted by Charly
I also did it as a loan. Basicially if you take out a regular loan from your 401K you have to repay w/in 5 years. If the money is for your 1st house and you take it as a loan they let you repay it over 10 years (reducing the monthly payment). My interest rate was 5.5% fixed.
If you just withdraw it and not take it as a loan you need to pay tax on it since the money was deposited pretax.
Hope that helps.
Do you have to repay it sooner if you leave your job?
It totally depends on your company's policy. That's a greqt question to ask prior to taking the loan. In my case I was able to leave my job and continue to repay monthly via a payment book. My friend however was not so lucky, she had 60 days to repay the loan when she switched jobs.
that's what my understanding was. I wonder about my plan. I'm going to make a call. I have about $20K worth of home improvements to make and that would help.
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| Posted 4/28/06 2:02 PM |
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joann564
LIF Infant
Member since 9/05 266 total posts
Name:
Jo Ann
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Re: OK, financial/tax people, help me out
I borrowed from my 401k a little over a year and 1/2 now and the rate was 5.75% I went to look at the rate today and it is 9.25%. I had the option to pay it back within 10 yrs since it was a primary residence loan but me thinking that I was very smart said I could pay it off in 5yrs instead. I figured hopefully I would have a new job in 10yrs. Little did I know i was going to change positions and take a huge huge pay cut so every paycheck is pretty patheic.
If I go out on a leave of absence I need to make payments and if I leave my job it needs to be paid back in full otherwise I will have to pay the taxes on the balance (which is still pretty high)
We do not have an option of early withdrawal. If I had to the option to do it again I would only I would make sure the payments were much much smaller.
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| Posted 4/28/06 5:23 PM |
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