What will happen to my 401k loan if I withdraw all my funds?
I had a 401k Loan half paid off when I got laid off. I am still unemployed and thinking about withdrawing my funds. What will happen to the outstanding balance on my loan?
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Answer by Hoa N
Usually, 401k plan gives you 60 days to make decision like Rollover or cash out. So in 60 days, if you can come up the cash of the loan and pay it back, then you could rollover to IRA. If you can't come up with cash, then it treats your loan as Distribution, they reported that distribution to IRS. You may pay 10% penalty+ your tax rate on that amount.
Why people willing give IRS free money of their hard earn money? I still don't understand it, they complain IRS this, IRS that. By the end of the year, here Uncle SAM, my 40% of my 401k to you and please enjoy it. What a paradox of life.
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