Should I use my 401(k) for a down payment?

[Jacob Sanders]

I'm still new here, so I apologize if there is a better forum for this post.

I am wondering if it would be worth it to use money from my 401(k) as a down payment on an investment property (a flip preferably). What are some of the pros and cons to using this method (aside from penalties for taking money out early)? Is there a way to avoid an early withdrawal penalty?

Thanks all!

[Edward B.]

@Jacob Sanders, I am very much against this strategy. Aside from the penalties and taxes (depending what type of 401k you have) the biggest draw back is that you cannot put the money back in if you take it out. You are capped by the IRS as to how much money you can put into tax advantaged accounts every year. So I am a proponent of always maxing them first and never, ever, pulling the money out.

Some 401k companies allow you to take out a loan, which may be worth considering if you can earn more from what you invest the loan money into than you could in the 401k. But remember, the return inside the 401k is not taxed while the return outside will be, so plan accordingly.