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I am 65 I want to use IRA funds as a down payment for a new…

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I am 65 I...

I am 65 I want to use IRA funds as a down payment for a new primary residence. I hope to repay these funds within 60 days of escrow closing. However, it could take longer than 60 days to sell my current residence thus delaying that repayment. Could I withdraw funds from my employer sponsored 401k to repay the IRA, then repay the 401k within 60 day. All to avoid the tax liability?

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Submitted: 8 months ago.Category: Tax
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Answered in 8 minutes by:
8/7/2017
Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 8 months ago
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,038
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 8 months ago

If you borrow from your employer's 401(k) you may have more than 60 days to pay it back. Most 401(k) plans allow loans for up to 50% of the account balance. When you borrow the funds, you set up a repayment plan for an amount that you want over a period of time that you want, usually as long as 5 years, or sometimes 15 years if the withdrawal is to purchase or improve real estate. One of my co-workers borrowed $5k and is paying it off at $50 per pay period over 48 months. The interest charged adds to the 401(k) balance - you are paying your own return on investment.

The biggest disadvantage of a loan from an employer retirement plan is that any outstanding balance at the time you retire/quit/get fired is deemed to be a taxable distribution.

I hope this answers your question! If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great week!

Roger

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