One option might be to borrow the money from his 401k to pay off the
debt, then pay interest to his 401k account.

Frank


"Leigh Menconi" <lmenconi[at]earthlink.net> wrote in message news:<TPazb.1877$Qd6.150[at]newsread1.news.atl.earthlink.net> ...
- quote -

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Yes, but I think he has already gotten all of the tax benefit of those
monies when he made the 401k contribution. There will be no additional
benefit to a rollover, which is what I think the original poster was
seeking.

Elizabeth Richardson

"PaulMaf" <paulmaf[at]aol.com> wrote in message
news:20031203024518.16046.00000049[at]mb-m21.aol.com...
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Even if his 401k plan allows it, the money put into the IRA would not
qualify to be deducted from his taxable income for this (or any) year
because it's a rollover, not a contribution. He'd have to take a
distribution and pay the withdrawal penalties and taxes to make it a
contribution which would totally nullify any tax savings of making the IRA
contribution.

Leigh

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He can if his plan allows it. IBM's plan does or at least did allow such
transfers.
The vast majority of plans do not allow a rollover while the person remains
emplyer with the firm.

"davdgreat" <davdgreat[at]yahoo.com> wrote in message
news:18f4f995.0312021112.2f01a377[at]posting.google.com...
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As someone already said, it's not really possible to do what your friend
suggested. A rollover of money from a 401k to an IRA is not the same as a
contribution that can be deducted from your taxes.

What you can do is reduce the amount that you're contributing the 401k until
the debt is paid off and use that money to pay off the debt. Yes, you'll
forgo the tax savings of having your taxable income reduced, but it will
probably be more than made up by what you'll be saving in finance/interest
charges. If your company's plan requires that if you withdraw from
contributing that there's a waiting period to re-start, you should reduce it
to, say, 1% or whatever the minimum contribution is.

Leigh

davdgreat wrote:
- quote -

No...way off...first - you might not be able to even consider it. If you
leave a job, you're allowed to move money from the old 401k plan to an
IRA, that's called a "rollover" of the assets. But you can't rollover
assets from your current job's active 401k plan.

But even if you can do it, if you rollover $2k from a 401k to an IRA
there isn't any tax effect at all. A rollover is basically a change of
the 'wrapper' where you're storing the assets, little more.

If you take money out of the IRA (or the 401k) to pay off your debt,
there would be a tax hit - a bad one. You'd pay income tax on the amount
you took out, plus a 10% penalty for taking an early withdrawal from
your retirement account. So after taxes & penalties you might end up
with $1k in your pocket from the $2k you took out.

That would be an expensive source of money to pay off a debt, and you'd
be blowing out your retirement savings at a time when every dollar
matters the most (these early dollars will be invested the longest).

-Tad

There was a similar thread in this discussion about what Im going to
ask but not really sure I understood. I am 23. I have been working
at a good company for about 3 years now and have been contributing to
my 401k and my employer has as well. Over the years I have racked up
some debtthat I would like to get rid of.
I was told by a friend of mine that I would be able to take about
2000 of my 3000 in my 401k and move it to an IRA. That would give me
a better tax refund. And I was plannin on using that refund as the
final blow to get rid of my debt.

Is this true?