AboutDavid M Iannopollo Expertise I am a professional financial advisor who can assist you with answers on mutual funds, annuities, IRA's, rollovers, qualified and non-qualified retirement plans, retirement planning, educational planning, life, disability and LTC insurances.
Experience I have over 20 years experience in the business and financial world.
I have a 401k with my previous employer (I also have one with my current employer)and was wondering if I can use my "old" 401k as a down payment to purchase my first home? If so, what would be the best option? I did read some articles online about this however, those just spoke of 401k accounts with current employers (I'm not touching that one it's the previous employer's is what I'm looking for). Any info would be greatly appreciated.
Thanks,
Ed
Answer Hi Ed,
You should first rollover the old 401k to an IRA. From the IRA, you can withdraw up to $10,000 for qualified acquisition costs of your first home and not pay a 10-percent, early withdrawal penalty on that amount. A 10-percent, early withdrawal penalty is imposed on IRA withdrawals before age 59½, unless an exception such as first-time home purchase applies.
To qualify for treatment as a first-time home buyer distribution, the distribution must meet all the following requirements.
1. It must be used to pay qualified acquisition costs within 120 days after the day you received it.
2. It must be used to pay qualified acquisition costs for the main home of a first-time home buyer such as you, your spouse, children, grandchildren or ancestors.
3. You have not withdrawn $10,000 previously for a first-time home purchase.
While you can avoid the 10% early withdrawal penalty, you will still be taxed as ordinary income on any amount withdrawn.
