Using a 401k to help with down payment?

[Phil T.]

Hi!  I've been interested in purchasing my first rental for a while, and am trying to educate myself as much as I can on the process.  What do you guys think about using my wife's 401k to help with the down payment on a rental?  She has about $10-11k in an old 401k, and has no intentions of going back into a conventional job any time in the near future, where she would be contributing to it again. It looks like the 401k would be worth $6500-7000 after taxes and penalties.   I know the taxes and penalties would be steep, but I can't help but think it might be worth it. Or, should I keep the 401k where it is and have a little more for retirement?  

Any thoughts would be appreciated!