Cashing out 401k due to COVID-19 $100,000 PENALTY FREE

[Evan Bonnell]

Anyone else considering doing this? Is this a crazy plan?

My plan:

My wife and I lost daycare so we're splitting time off to take care of our children. 

We have significant cash reserves and 75% equity in current RE portfolio of 5 SFR's

We have several hundred thousand currently in 401k

Wait until market rebounds to pre-pandemic levels, then...

Withdraw $100,000 from 401k, penalty-free, pay taxes over 3 years

Use $100,000 for 25% down payments on two duplexes (30 year fixed mortgages)

[Natalie Kolodij]

Okay a few things: 

1. to qualify you have to have been directly impacted medically, or had a financial hardship as a result of covid 19

2. It could be tax free potentially 

It's a withdraw of up to $100k and you can either. 

A. pay it back within 3 years= tax free. 

B. Keep it forever and recognize the income across 3 years reducing the tax hit 

The 10% early withdraw penalty is waived. 

But we also have no idea if they'll decide there are definitive things they want to see later. What they may want as "proof" of hardship. It's very vague.