Author Topic: 401k Rollover to finance house purchase  (Read 303 times)

SugarMountain

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401k Rollover to finance house purchase
« on: January 25, 2022, 11:47:50 AM »
We retired in 2020 and I have not yet rolled over my 401k.  We're in the process of buying a house and we made a cash offer that was accepted.  I plan to finance this via a margin loan on our taxable account until we sell our current residence, which should sell for pretty close to what we're paying. But with the market seeming to get more volatile I'm also thinking about plan B. One thing I've found is rolling over my 401k to an IRA can essentially give me a 60 day loan until I need to deposit it in the IRA account.  One potential issue is I believe they may do a 20% withholding on that money.  Anyone ever done this?

SugarMountain

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Re: 401k Rollover to finance house purchase
« Reply #1 on: January 25, 2022, 01:14:41 PM »
We retired in 2020 and I have not yet rolled over my 401k.  We're in the process of buying a house and we made a cash offer that was accepted.  I plan to finance this via a margin loan on our taxable account until we sell our current residence, which should sell for pretty close to what we're paying. But with the market seeming to get more volatile I'm also thinking about plan B. One thing I've found is rolling over my 401k to an IRA can essentially give me a 60 day loan until I need to deposit it in the IRA account.  One potential issue is I believe they may do a 20% withholding on that money.  Anyone ever done this?

I found the answer with a call to Fidelity, so I'll share it here in case anyone else is looking.  You can do this with your 401k, however you will have 20% withheld as I thought.  But, if you roll the 401k into your IRA directly you can then take a distribution from your IRA you can then roll it into an IRA, even the same one, within 60 days and not incur any tax penalties or have to have anything withheld. There are apparently some forms that will be generated like a 1099 and a 5498.

As always, usual disclaimers apply.  This is not tax or investing advice, do your own due diligence and consult a tax professional if necessary.