Liquidating 401k for home purchase

10 May

For this reason, over 50 million Americans have a 401k, with assets over .8 trillion.

Those numbers have dropped somewhat as individual retirement accounts (IRAs) have become more popular, but they are still quite robust.

I’ll start by saying that you can withdraw money from your 401k at any time.

You work, you save, you retire – it's the American way, right?

Another thing, the methods shared below allow you avoid the 10% penalty, but they do not….

I REPEAT….not prevent you from having to pay the tax.

Thus if you withdraw 00 from your 401k plan at the age of 45, you will have to pay a 0 penalty, as well the 00 will be included in your taxable income when you file taxes; a double whopper!

The amount placed into a SEP-IRA is 100% tax-deductible.

Most retirement investors know that if you withdraw funds from your 401(k), traditional IRA or 403(b) plan before the age of 59 and 1/2, you will be charged with a 10% early distribution penalty; however there are always exceptions to this rule.

Also, this rule does not apply to Roth IRA, you can withdraw as much of what you have contributed to your Roth IRA as long as your plan has been in existence for atleast 5 years.

A SEP-IRA can easily be set up on line with most major brokerage companies, such as Vanguard and funded with a simple electronic funds transfer from your personal or business account. This simplicity is the main advantage over a solo 401K. Rather than limiting contributions to the usual amount of an employee 401K deferral (currently ,500 per year), the laws allow you to also put in an employer contribution (really all the same money for a sole proprietor), for a total of up to ,000 per year, exactly the same as a SEP-IRA.

A solo 401K, however, is a more complex beast than a SEP-IRA.