401k Hardship Withdrawals - An OverviewWritten by Rick Meigs, Publisher, 401khelpcenter.com
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The following four items are considered by IRS as acceptable reasons for a hardship withdrawal: * Un-reimbursed medical expenses for you, your spouse, or dependents. * Purchase of an employee’s principal residence. * Payment of college tuition and related educational costs such as room and board for next 12 months for you, your spouse, dependents, or children who are no longer dependents. * Payments necessary to prevent eviction of you from your home, or foreclosure on mortgage of your principal residence. Hardship withdrawals are subject to income tax and, if your are not at least 59½ years of age, 10% withdrawal penalty. You do not have to pay withdrawal amount back. For more information on this and other 401k issues, go to www.401khelpcenter.com.
Mr. Meigs is the founder and President of 401khelpcenter.com, LLC a three-year-old Internet Company based in Portland, Oregon. It is a leading provider of information, opinion, analysis, news, rules, and other 401k resources for plan sponsors, small businesses, and employees.
| | 401k Plan Loans - An OverviewWritten by Rick Meigs, Publisher, 401khelpcenter.com
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There are generally four reasons given to avoid 401k loans if possible: * Lower investment return. According to General Accounting Office, interest rate you pay yourself on your plan loan is often less than rate your plan funds would have otherwise earned, and you lose benefits of compound interest. * Smaller contributions. Because you now have a loan payment, you may be tempted to reduce amount you are contributing to plan and thus reduce your long-term balance. * If you quit working or change jobs, you must pay back loan right away. It's not uncommon for plans to require full repayment of a loan within 60 days of termination of employment. If you don't repay, loan is considered defaulted, and you are taxed on outstanding balance, including excise taxes in many cases. * Repayment of principal and interest is made with after-tax dollars. By contrast, a home equity loan from a bank is often structured so that interest you pay is tax-deductible. On a larger loan, this could add up to significant savings. Go to www.401khelpcenter.com for more information on this and other 401k issues.
Mr. Meigs is the founder and President of 401khelpcenter.com, LLC a three-year-old Internet Company based in Portland, Oregon. It is a leading provider of information, opinion, analysis, news, rules, and other 401k resources for plan sponsors, small businesses, and employees.
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