401k monies

Discussion in 'Fibromyalgia Main Forum' started by paige51, Aug 1, 2006.

  1. paige51

    paige51 New Member

    i know this is a health board, but need to ask this question anyway. Can't my husband get a lawyer and get his 401k money for finicial and medical hardship even though he has a loan that was taken out a while ago and has not yet paid it all back?

    Someone mentioned this to me, but I do not know how it works.

    This would help with the finances a lot. He is getting very stress also.

    He called and asked this question. I could tell in the representatives voice that she did not want to answer the question and asked who told us about it? Never did get a direct answer from her.

    any input will be well welcomed.

    thanks
    paige51
  2. julieisfree05

    julieisfree05 New Member

    I don't know the rules, but I don't think that you can have more than one loan against your 401(k) at one time. I think it's possible to apply for a second loan that will pay off the first one and give you some extra cash - so you'll still have only one loan.

    As for the "medical hardship", I don't know the rules about that..

    Good luck!

    - julie (is free!)

    At a moment like this
    I can't help but wonder
    "What would Jimmy Buffett do?" - Alan Jackson
  3. paige51

    paige51 New Member

    Thanks. Some companies alow you to have two loans against your 401k, his company does not. Some of our friends jobs allow them to do this, it is in thier manual.

    I know the money is for retirement, but, if it is needed in a critical situation like ours, I do not see why he is not allowed to withdraw what he needs out.

    I will speak with a lawyer about it.

    thanks
    paige51
  4. Greenbean7

    Greenbean7 New Member

    Paige, sorry you are going through this and that these confusing problems have to be dealt with.

    401k plans differ with many companies. Some allow several loans at one time as long as the payments do not equal more than a certain percent of the employees salary. Others allow only one at a time.

    As for hardship withdrawals, that can be tougher. The definition of "hardship" can also very from company to company. If this is a large company I would contact the home office and not deal with the branch. The reps, although well meaning (been there!), don't always know all the ins and outs like the home office people will.

    Some companies, although they refer to the plan as a 401k, actually have a profit sharing, SEP, or Simple plan in place. Rules vary with these plans, also.

    If possible, I would talk to the rep. Most of our smaller companies (I work for an investment advisor) use a CPA firm to manage the day-to-day activities of there plan. Often this is who you need to talk to instead of the company.

    Good luck! Let us know how it goes.

    Hugzz
    Greenbean

    Stop and smell the puppies!
  5. azbubba

    azbubba New Member

    OK, hope this doesn't get too long and tedious...but after doing this (withdrawals) a few times, I'll share what I know.

    1. A company does not have to provide loans using a 401(k) as collateral. Most do these days, but it's not mandatory.

    2. You may withdraw from a 401(k) at pretty much anytime, provided you give the plan administrator enough notice. However, as you probably know, that withdrawals are taxed at whatever your marginal rate is (the rate that you pay taxes on your regular income), plus 10% penalty. There are two exceptions to this:

    a. If the withdrawal is paid back by the end of the fiscal year (usually 12/31), you should not have to pay tax on it. If your plan administrator does not allow repayment of withdrawals, you should be able to open a Rollover IRA.
    b. There are several reasons that you may avoid paying the 10% penalty on it, and only pay your marginal rate. One of them is medical expenses. Form 5329 is what you're looking for, if you do your own taxes.

    The usual disclaimers: I am not a tax professional...just someone with a lot of experience. Please consult a tax advisor.
    [This Message was Edited on 08/01/2006]