What happens to 401k loans when you change jobs?
If I am planning to leave my job in the near future and I have 30k in my 401k and approx. 12k in loans, how will the loans be repaid? Do I pay the taxes at year end? Also what if I decided to cash out the rest?
Asked By: Flying J - 6/20/2007
Best Answer - Chosen by Asker
It depends on the requirements of your 401(k) plan. Some 401(k) plans allow you to continue to make payments on loans after you leave your job. Others require you to pay back loans within a certain number of days (often 30, 60 or 90) after you leave, or the loan will become a distribution... More
Answered By: aj485 - 6/20/2007
Additional Answers (3)
You need to pay back the loan before you leave or you will be charged taxes as though you received a distribution. Generally that is state tax, federal tax and a 10% penalty on top. If you want the rest of the money, I would suggest rolling it over into another qualified plan, such as an IRA. That way you will avoid... More
Answered By: Angie - 6/20/2007
aj485 has it right...only thing I would add is that your new job may allow a loan rollover. It's not well publicized but it's legal to do. That would keep you from owing taxes...you'd simply start making payments at new plan (you'd also have to make up missed payments!). If you cash out the rest you'll actually... More
Answered By: digdowndeepinseattle - 6/22/2007
You get the option to leve it there or move it with you. You may also close it out and get a penalty or put it in an IRA. You have the choice, your past job will let you know.
Answered By: Pepper - 6/24/2007
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