{ "media_type": "text", "post_content": "So if I took out a loan against my 401k can someone tell me the penalty percentage I will get hit with if I get a new job before I finish paying the loan back? TIA 😉", "post_id": "5f6feed5f04eb0002187b01c", "reply_count": 17, "vote_count": 1, "bowl_id": "564a5cdb94887803001dd07c", "bowl_name": "Accounting" }

So if I took out a loan against my 401k can someone tell me the penalty percentage I will get hit with if I get a new job before I finish paying the loan back? TIA 😉

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10% of balance due and ordinary income tax rates on outstanding balance.

helpfullikesmart

Check the terms of the loan. You may not be penalized if you get a new job before paying it back. I took out a loan to help with a down payment on our house. When I left EY, I didn’t have to pay back the loan and didn’t get penalized for it either. All I had to do was set up monthly automatic payments. I called them about it three times to confirm (haha!) and read the loan agreement and it is true. I am still paying the loan and haven’t worked at EY for years. You do have to keep the 401k with the same provider and can’t roll it over. That was fine with me though bc my plan was doing really well so I wanted to leave it.

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I did the same

CARES Act provisions might help with this. Check into that. There’s a provision on loans and suspending loan payments for 2020.

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Thanks everyone, all of that is really helpful! Honestly I thought I was gonna get ridiculed for having taken a 401k loan..... thanks also for not doing that 😉

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You pay the taxes over 3 year period but if fully paid back within 3 years, you get the taxes paid refunded. Note: if you lie and take a covid withdrawal but don’t meet the criteria, you face a $15,000 penalty.

^^ This. I took out a loan from my 401k to put towards a down payment on our house. About 3 years in, I was laid off. Luckily I got a nice severance package and was able to repay the balance in its entirety.

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IIRC you can avoid that but only if you can pay off the outstanding balance

Correct.

EY’s plan let’s you keep the loan after you leave. Been gone 2 years now. Still have the loan.

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