So, my family is relocating to another city due to my husband's job. I have quit my job and we are trying to sell our house.
Other important facts:
1. Being recently converted mustacians, we had a very small emergency fund to work with and it is mostly gone now from paying to get the house fixed up to a salable condition
2. Having bought our house near the peak of the housing market, we have little to no equity. We owe about as much money to the bank as we can hope to sell for, which means that after commissions and closing costs we will need to bring money to the closing when it happens.
3. I have a sizeable 401k from the employer I just left and the 401k has some Roth funds in it. The plan is administrated by Vanguard.
I would like to take a withdrawl of the the Roth contributions in my 401k to help pay off my underwater mortgage at closing. I'm lead to believe that as long as I only withdraw my Roth contributions I will not be subject to a penalty. However, I was poking around on my Vanguard site and started (but did not send) a distribution request from my 401k to see how it was handled on the site. It appeared that if I were to take a distribution, 10% would we withheld.
Is this because the Roth funds are in a 401k as opposed to a Roth IRA? If so, can I roll my 401k over to an IRA and take out the contributions without a penalty that way?
Or is the Vanguard website misleading and I could actually withdraw from my Roth contributions from the 401k directly without a 10% penalty?
Are there other thoughts on a better way to handle this financial situation? I hate pulling money out of my retirement fund, but it's the only way to get the money I would need and the house is pretty much a sunk cost at this point.