Pulling Money out of 401K to pay off mortgage

[PEC59]

Question: Will I have to pay Income if I pull $40,000 out of my 401K retirement fund to pay off my house?

I am thinking of paying off my Mortgage as discussed on another thread,
but I forgot to mention the money I want to use is in a 401R retirement account.
Anytime i take money out the bank files a 1099R and I have to claim it as income.

Anyway I want to take $40,000 out to pay off my mortgage loan.
As the 401K earns only about 2% and I pay 4.87% on the Mortgage, so its worth it.
As I stated on my the other thread I will repay myself over a 5 year period.

Thanks for any thoughts on this..

[bjl584]

Invest your 401K in more agressive funds so it earns more than 2%. Then cut back on expenses and apply that money toward the mortgage. Don't touch your retirement savings.

That's going to be the answer you get from most on here.

[jIM_Ohio]

Focus on how the 401k is invested. Is the 2% a 1 year return or 10 year annualized return?
Why is there a time deadline on paying off mortgage?
What is the interest rate on mortgage?
What is the interest rate on 401k loan?

[jimmyrules712]

Originally Posted by PEC59

Question: Will I have to pay Income if I pull $40,000 out of my 401K retirement fund to pay off my house?

I am thinking of paying off my Mortgage as discussed on another thread,
but I forgot to mention the money I want to use is in a 401R retirement account.
Anytime i take money out the bank files a 1099R and I have to claim it as income.

Anyway I want to take $40,000 out to pay off my mortgage loan.
As the 401K earns only about 2% and I pay 4.87% on the Mortgage, so its worth it.
As I stated on my the other thread I will repay myself over a 5 year period.

Thanks for any thoughts on this..

You should be able to change what the 401k is invested in so it earns better than 2% interest. You also may have the option of taking a "loan" from your 401k which you wouldn't not have to pay the taxes on, but which you are forced to pay back over a time period.

[littleroc02us]

I'm not an expert at withdrawing from your 401k, but when I was young I made the stupid mistake of cashing out all of my 401k's and had to initially pay 10% on that in taxes and then was taxed again at tax time @ 28%, so the gov't got 38% of the amount. Wish I could have that back.

[cicy33]

Originally Posted by PEC59

Question: Will I have to pay Income if I pull $40,000 out of my 401K retirement fund to pay off my house?

I am thinking of paying off my Mortgage as discussed on another thread,
but I forgot to mention the money I want to use is in a 401R retirement account.
Anytime i take money out the bank files a 1099R and I have to claim it as income.

Anyway I want to take $40,000 out to pay off my mortgage loan.
As the 401K earns only about 2% and I pay 4.87% on the Mortgage, so its worth it.
As I stated on my the other thread I will repay myself over a 5 year period.

Thanks for any thoughts on this..

If you mean that you are taking out a loan on your 401K, I didn't think you had to count it as income? I am not sure though.

[Seeker]

Read this article fully:

When Can I Take Money Out of My 401k? | Personal Finance Analyst

[maynard]

I took a hardship withdrawl from my 401k several years ago. And yes it was added onto my taxable wages (income)