clydewolf

Debmc1958,

Cashing out your 401k is usually not a good idea. But if you are going to use this for a down payment on a house, you need to realize that your tax bill also decreased by that same 30% loss, as did your 10% penalty for early distribution - if you are under age 59.5.

If you are age 55 or older, you can take penalty free distributions from your previous employer's 401k without penalty. A similiar penalty free distribution from an IRA known as a 72t distribution is possible but more restrictive and you must continue taking equal distributions each year for the longer of 5 years or until you are age 59.5.

Typically you must be employed by the 401k plan sponsor to take a loan from the 401k plan. So you could move your old 401k into the new employer's 401k, and take a loan. The maximum loan amount is typically 50% of the 401k balance. Paying the loan back begins immediately. Also if you were to leave your employer, the 401k loan balance would become due usually within 3 months or it is considered a distribution from the 401k. Taxes and penalty would need to be applied as applicable.

The best idea would be to save up at least 20% of the purchase price of house outside of a retirement savings plan.