Leaving job. 401k > partial rollover, partical cash out?

 ANY advice on the following would be appreciated.

Here's the deal.

I took another job two states away. I start in one-and-a-half months
(they're real flexible on start time, but I don't want to jerk them
around for obvious reasons).

I want to sell my house here and buy a house there, all in one move if
possible.

The housing market around my current house is OK, but obviously it's no
sure thing I'll sell this place in four or five weeks, and I would need
another source (other than the equity in my current home) for the
downpayment cash for the new house. Unfortunately, I don't have 20k in
cash.

Now, I understand when I quit, I can cash out or rollover my 401k into
an IRA.

Can I *partially* cash out my 401k and rollover the rest?

I would need about five grand out of it.

I know, I know -- 10% penalty and taxes due and all that. But, the tax
situation is minor. (I have five kids -- the exemptions and the $5,000
in child tax credits forgives a lot of sins)

Any thoughts?

Yeah, I'm going to talk to my mortgage company, benefits admin and all
that, etc., etc., but I was hoping to get some other advice here.
Thanks in advance!

 

You would be better off borrowing the down payment, and pay it back in full
_as soon as your house is sold_. This way, there is zero impact on your
retirement funds. If you cash out, you lose the 10% on the amount forever,
and this affects compounding greatly. If you borrow, you only lose 10% (+/-)
(interest on a loan) for a few months. This only works if the mortgage
company approves of the idea. Depends on your situation.

 Alan wrote:

Good idea....ask your mortgage company (or even your bank) for a 'bridge
loan'.

 

When we bought our house, the closing documents included a sworn statement
that the down payment "was not borrowed in any way."

This situation is why there are bridge loans.  You borrow money at a higher
rate with less security for a while, then when you sell the old house, you
refinance the bridge loan with a conventional mortgage on the new house.

This is such a common situation that I am sure your bank has a standard way
of handling it with minimum fuss.

  jvending9801@hotmail.com wrote:


Yes, you can legally do that.


Yes, stupid, stupid, stupid.  Stupid with zeros on the end.
It will take a $10K withdrawl to get you $5K by the time you
pay all the taxes and penalties.  You would be far better off
to put this $5K on a credit card, and then work like mad to
pay it off when you start you new job.  401K and IRA money
is for retirement.  If you spend it now, you might not have
any money to buy food after you are too old to work.  Think
about that carefully, and decide if you want to be in a position
where you have to fight the neighborhood stray cats and dogs
for table scraps that you find in dumpsters.  Not a pretty
thought.

-john-

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John A. Weeks III           952-432-2708            john@johnweeks.com
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