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| *Loan,banking and credit>>>commercial loan |
Can I use my 401(k) to pay commercial student loans without incuring heavy taxation? |
Can I use my 401(k) to pay commercial student loans without incuring heavy taxation? Nope, sorry. If you take the money OUT of your 401(k) it is considered a withdrawl and will be taxed as such. As suggested already, you can take a loan out against it and not incur the penalty, but you will need to pay it back. So, pay back the commercial loan or pay back the 401(k) loan - either way you pay it back, but when you borrow it from your 401(k) the money you borrow is NOT earning dividends, interest, and more money for you! Here's a great place to visit for some more info: http://moneycentral.msn.com/articles/ret... You may be able to take a loan against your 401(k) for this, but you'll have to pay it back (with interest) to avoid penalties & taxes. http://www.nohasslebargains.com/loan/id4... Student Loans Financial Services If you meet the requirements for a 'hardship withdrawal' you would be able to avoid the 10% early withdrawal penalty, but you would not avoid any regular taxes on the distribution. If your plan allows for a loan, it is probably your best option. unless the student loan is very high interest do not even considering a 401k loan. Almost certainly would not qualify as a hardship case unless you have other big debts. Just do not do it. Only if its a Roth 401(k) and you have met the age and time requirements to take tax-free distributions. A traditional 401(k) is taxable at distribution. You could potentially take a loan from your 401(k) provided the plan allows for loans (not all do). This would not be taxable provided you didn't default on the loan or take a full distribution of your 401(k) account balance while still having an unpaid loan balance. there is a penalty for early withdrawl and yes you do have to report the money on income tax |
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