Retirement tax questions


@TomD8 wrote:

Another alternative is to take a loan from your 401K.  You'll generally have 5 years to repay the loan, plus interest (but the interest you pay goes back into your 401K account).  There are no taxes or penalties on a 401K loan.  Your 401K plan may have a limit on the amount you can borrow.  Drawback: if you can't repay the loan, it's considered defaulted, and in that case you'd owe both penalties and interest.


A loan does not apply, taxpayer is quitting (separating from service.). As soon as the taxpayer quits, the loan gets converted to a distribution, and subject to tax and penalties, unless the taxpayer can repay the loan within the required time frame.