I have a 401K from a job I left ~7 months ago. I'm looking to buy some land and do construction on it. I need to put about $40K down on the land, but I only have ~$30K in savings.
What's the best way I can use the 401K to make up the difference?
Two things I'm considering:
- I could roll the 401K over into an IRA. Then I think I'd be allowed to withdraw $10K from the IRA, penalty free, as a "First Time Home Buyer". I have six questions about this though...
Q1. Do I qualify for "First Time Home Buyer" in the first place? I already own a home I bought in November 2016. I've heard that despite the name, this limitation only applies if you've bought a home within the past 2 years though. Q2. What are the tax implications, and how can I most easily pay those taxes? IE, can I somehow take extra money out of the 401K to cover the taxes...? Or would I want to pay the taxes out of savings? Q3. What type of IRA would I want? I think there's both "Roth IRA"s and "Traditional IRA"s or something like that? Q4. How long would the money have to be in the IRA for before I could take it out? Q5. How much can I move from the 401K into the IRA? Q6. Does buying land, getting a construction loan, and rolling into a mortgage once construction is done qualify as a buying a home? Would it all have to be done in a single tax year?
- I could take out a loan against the 401K, right? Would there be tax implications for this? Would this be a qualified reason for taking a loan out against the 401K?
Thanks for any input.