DEAR HARRY: We have been married almost 10 years, always living in apartments. Now we've seen a home that is just about ideal.
The problem is that we have tied up most of our savings in 401(k) plans so that we are quite a bit short on our proposed 20 percent down payment. We don't want to go lower because we can get a low monthly payment that way. We understand that there are ways to get money from a 401(k) without paying taxes on it. How?
WHAT HARRY SAYS: To a limed degree, that is true. You can borrow up to the lesser of half your plan's value or $50,000. However, any withdrawal will get you hit for the tax plus a 10 percent penalty (if you're not yet 59 1/2). You must repay on a regular schedule similar to a mortgage repayment. Unlike other such loans, you're not restricted to a five-year period because you are using the money to help with a home purchase. If you choose a direct withdrawal, as opposed to a loan, you'll get hit with the tax and penalty. If you change jobs, be sure to make a rollover to your new employer's plan of the entire 401(k) balance, or you will trigger a withdrawal of any loan balance and the tax and penalties. Be sure to follow the rules scrupulously.
Email Harry Gross at harrygrossDN@gmail.com or write to him at the Daily News, 801 Market St., Philadelphia 19107.
