Question

This might be a novice question, but have fees been removed/reduced from 401(k)’s due to the pandemic? I was thinking that now might be the time to take out from it to pay off a small loan that I’m trying to get rid of. Any insight from people much more knowledgeable than me would be great. Thank you!  

Answer 1

I agree with @iconostasis23. This is probably a terrible idea. There are situations where it makes sense (you are finding dead animals in your pool, mean looking guys are pointing guns at you, or you are sleeping in your car) but there are probably better options. I believe the government is going to allow people to take from their retirement accounts without the normal penalty, but you are robbing from you future self to pay for this loan. Plant a garden to reduce your food bill, ask your mom for an interest free loan, apply for a job with the census burea, stop paying for cable, storage units, netflix, . don't dig into your retirement account.  

Answer 2

Depends on if your employer adopted the new options. But yes. Federal cares act allows you to take up to 100% of your 401k (or 100k which ever is less) without 10% early withdrawal penalty. Taxes are still due as the money is income. You have two options: A. Withdrawal and have taxes withheld/or take three years to split the taxes up. B. 3 years to repay the withdrawal and pay no taxes.  

Answer 3

My company and 401k provider have sent nothing out about fees for early withdraw and loans. Although i do believe those values are set by the government.  

Answer 4

Even without fees this idea is not a good one. Unless the scenario is “I am retired and need money to live” taking loans from and cashing out your retirement are always bad ideas. Tighten up your budget, sell some stuff, go without on a few “nice to haves” and get rid of the loan that way.  

Answer 5

"small loan" Make extra payments and get rid of it.  

Answer 6

Thank you for the insight. The loan has about 5k left on it (high interest like with most loans, 24%) which was my thinking in trying to get rid of it. But it sounds like I should avoid taking from the 401(k) and just finish off my normal payments.