401(k) loan setback.

Author:Scott, Matthew S.
Position:Brief Article

QA I am 51 and was recently downsized from my job of 18 years. Prior to the downsizing, I had taken out a loan against my 401(k) and was paying it back. Since trying to continue making payments would be a hardship for me, I stopped. What should I do with the balance of approximately $6,000 that's left in my 401(k) account?

--Y. Jones Via the Internet

Unfortunately, your dilemma is bigger than simply figuring out what to do with what's left in your 401(k). The unpaid balance of the loan you took out against your 401(k) will be counted as a distribution, which means you will have to pay a 10% early withdrawal penalty for taking money out before age 59 1/2, plus any income tax the balance has accrued.

You didn't say how much you borrowed from your 401(k), but it's disappointing to hear that you only have...

To continue reading