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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15716
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am planning on withdrawing from my retirement accounts

Customer Question

Hello I am planning on withdrawing from my retirement accounts for the purpose of purchasing an eventual primary residence. I plan on relocating from Minneapolis back to the country of Wisconsin after 26 years. I am allowed to take up to 12000 for the down payment or associated costs. The problem is I don't know how long it will take to wrap things up here in Minneapolis. I have to find a new job sell my home etc. And I've been with the same employer for 26 years. I guess my question is the house is a historical house and has already SAT vacant for five years which is not good for any house. If it takes me 6 months to a year is it possible to rent out this house temporarily? It will eventually become my primary residence but it may take several months to a year. And if this is a no no what's the worst that can happen with the IRS? I'm already being penalized enough being under 50.
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.


If you take money from a retirement account (a 401k) there is no adverse situation if you use the property for rental until you move there.

If you are making a hardship withdrawal then the plan document would determine the withdrawal and although the ERISA rules govern retirement accounts you would not be penalized for the rental use till you could move there.

A retirement plan may, but is not required to, provide for hardship distributions. Many plans that provide for elective deferrals provide for hardship distributions. Thus, 401(k) plans, 403(b) plans, and 457(b) plans may permit hardship distributions.

The IRS would not penalize you. The plan must request their own documentation if this is a hardship withdrawal.